$2b lost in smoke
Illegally imported cigarettes hit Gov't hard
Illegally imported cigarettes cost the Government almost $2 billion in lost taxes, according to Richard Lewis, chairman of Carreras Group, the local distributor of the product.
It's the latest estimate from the company, which views the illicit trade as surging.
"We, however, believe that there is a significantly greater appreciation by law enforcement agencies and the Customs Department of the loss in Government's revenue as a result of the illicit trade in cigarettes, which we estimate amounts to just under $2 billion," Lewis said in his statement in the company's annual report released this week to shareholders.
In January this year, Mike Surridge, commissioner of the Revenue Protection Department (RPD) of the Ministry of Finance, reportedly quantified losses to Government from the smuggling of illicit liquor and cigarettes at $2 billion. He, however, did not disaggregate the losses attributed to each item.
Carreras' management focused on stemming the illicit trade during the financial year as a means to offset macroeconomic and regulatory challenges. Carreras highlighted its "grave" concern regarding the "significant" upsurge in the presence, quantity and distribution of counterfeit Craven A within the Jamaican market. Carreras' main products include Craven A and Matterhorn brands of cigarettes.
"However, we continue to implore the relevant law enforcement agencies and, in particular the Jamaica Customs Department, to bolster their port-monitoring and border-control apparatus towards clamping down on the apparent ease with which the counterfeit and contraband cigarettes enter the local market," added Lewis.
There are two categories of illicit cigarettes -- those that are legally produced and imported illegally into Jamaica, and counterfeit products, illegally produced and imported.
During its financial year the company faced the introduction of public smoking restrictions, new public health labelling and double-digit currency depreciation against the US dollar.
"These factors, plus a growing illicit trade in cigarettes and the impact of the introduction of tobacco control regulations, all combined to constrict our top line results," Lewis said, adding that the company consequently suffered reduced profit.
Carreras made $4 billion in net profit for its year ending March 2014, or roughly one-third less than the $6.4 billion made a year earlier.
During its financial year, Carreras started receiving payments from Government, in regard to the over $3.5 billion award in its legal fight against Tax Administration Jamaica (TAJ), previous financials indicated.
In 2004, Cigarette Company of Jamaica received assessments for income tax claimed by the tax authorities for the years 1997-2002 amounting to $5.68 billion, including penalty and interest.
The company appealed the assessment. Whilst the appeal was in progress, the company paid $1.73 billion to TAJ. The Cigarette Company appealed the assessment and on March 13, 2012, after a volley of judgments and appeals in lower courts, the Judicial Committee of the United Kingdom Privy Council handed down its decision dismissing the TAJ's appeal and awarded costs to the Cigarette Company.
Illegally imported Craven A and Matterhorn cigarettes seized by Customs in this April 2010 file photo. Distributor Carreras estimates the loss in Government's revenue as a result of the illicit trade in cigarettes at just under $2 billion.