As the Jamaican Government prepares to implement an increase in the Special Consumption Tax (SCT) on cigarettes, marketing and distribution company Carreras Limited is calling for stronger enforcement measures to combat illicit trade, warning that without tighter controls the higher levy could unintentionally fuel the underground market.

Effective May 1, 2026, the SCT on cigarettes will move from $17 to $20 per stick. The excise to be applied to both imported and locally manufactured products is projected to generate approximately $1.1 billion in additional annual revenue. The tax measure is also aimed at reducing tobacco consumption while promoting public health.

Reacting to the impending hike, a Carreras executive on Monday told the Jamaica Observer that while the company acknowledges the Government’s revenue objectives, it is urging a balanced approach that pairs excise increases with robust enforcement.

“At Carreras, we appreciate the Government’s responsibility to raise revenue through excise policy, supporting national expenditure, particularly as the country continues to recover from last year’s Hurricane Melissa. We value excise adjustments that are fair and appropriate, but they must be supported by strong enforcement, especially in a market where illicit trade already represents 34 per cent of consumption,” said Corporate Affairs Manager Imega Breese McNab in response to Business Observer queries.

“If the Government can satisfy this approach, revenue will be safeguarded, while restricting the unintended consequence of further growth in illegal, untaxed product,” she added.

Pointing to recent data, Breese McNab noted that Jamaica’s illicit tobacco market remains significant, with estimates suggesting that the Government lost approximately $5 billion in 2025 in applicable port charges and taxes due to illicit trade.

She further cautioned that while tax increases have historically resulted in contraction of legal volumes, this was not necessarily because overall consumption falls sharply, but because more consumers migrate to cheaper, untaxed alternatives.

Regarding it premature to quantify expected losses in sales for the company at this time, Breese McNab said these outcomes are typically influenced by both the size of the hike and the effectiveness of enforcement.

“The key determinant of sales and revenue outcomes will therefore be how effectively enforcement constrains illicit supply, rather than the nominal rate increase alone,” she noted.

As a subsidiary of British American Tobacco (BAT), Carreras operates in a high-tax environment where excise duties account for nearly half of the retail price of cigarettes. Over the last few years, the company has had to adjust product prices in response to rising tax obligations.

Illicit cigarettes, which evade taxes and regulatory costs, are often sold at significantly lower prices on the black market, posing a serious threat to legitimate operators’ market share and earnings. Despite these challenges, Carreras said it has continued to manage its tax-related operational costs through strategic pricing and brand portfolio management.

At the end of its third quarter ended September 30, 2025, the company reported revenues of $5.4 billion for the three-month period, contributing to year-to-date revenues of $15.4 billion — 21 per cent higher than that in 2024. This, as quarterly profit stood at approximately $1.7 billion, with $4.8 billion accumulated over the nine-month period.

Carreras, in advocating what it described as a balanced revenue strategy, said this should combine predictable excise policy with stronger border control along known illicit trade routes and enhanced retailer compliance mechanisms.

“International experience demonstrates that hampering the illicit market delivers more sustainable revenue gains than to increase rates on a shrinking legal base,” Breese McNab said.

Company Chairman Patrick Smith, further underscoring the need for collaboration to protect both revenue and public safety, said in a recent shareholders’ report that Carreras will continue to work with law enforcement, State agencies and private sector partners to achieve this.

“Through enhanced information-sharing, targeted awareness initiatives, and coordinated intelligence efforts we are enforcing the integrity of the legal market while supporting national efforts to curb criminal activity,” he said.

BREESE MCNAB… we value excise adjustments that are fair and appropriate, but they must be supported by strong enforcement, especially in a market where illicit trade already represents 34 per cent of consumption