JCTC refutes Carreras's claim that cigarette excise is responsible for illicit tradeSunday, September 08, 2019
DR AGGREY IRONS
The Jamaica Coalition for Tobacco Control (JCTC) notes with interest recent statements by board members of Jamaica's main tobacco company who assert that government excise duty is fuelling the illicit trade in cigarettes and a consequent decline in its sales.
Yet, according to Carreras Limited's 2019/2020 first-quarter report, in the first three months up to June 30, 2019, sales grew 10 per cent, and $3.45 billion worth of cigarettes were sold compared to the corresponding period in 2018. In that period, profits increased 12 per cent to $923 million, and the company's own chairman has stated that profits would have been greater had it not invested in strategic initiatives to bolster growth.
The company also claims that, based on its own internal studies, almost one-third, or close to 33 per cent of cigarettes sold in Jamaica are illicit, a huge leap from the 25 per cent its managing director last year stated the local illicit trade represented.
However, according to recent research presented by Jamaica's Ministry of Finance at a World Health Organization workshop, those numbers are over-exaggerated, with the country's share of illicit cigarettes being about 8.7 per cent. This estimate was based on an independent, academic, and transparent, “Gap Analysis” Methodology.
The over-exaggeration of the illicit trade figures is a long-recognised tactic of the tobacco industry, globally. Research shows that tobacco companies often fund research and disseminate information on the illicit trade, and that such data is not reliable.
The JCTC acknowledges that illicit trade in cigarettes is a problem. The illicit trade in cigarettes increases the affordability and availability of these harmful products. We, however, believe that it is disingenuous of Carreras to place the burden of the illicit trade solely on cigarette excise, especially when more important contributory factors are at work.
There is a mountain of evidence that shows that taxation is not the main source of the illicit trade, but rather corruption, lax law enforcement, inefficient border control measures, and weak penalties for smuggling.
According to the World Bank, strengthening tax administration and enforcement are crucial to reducing the illicit trade. In some jurisdictions, when the overall tax share is high, illicit cigarette trade is low. And in other countries, the overall tax share is low, but illicit cigarette trade is high!
While the very nature of the illicit trade makes precise figures difficult to determine, 2012 statistics obtained from the Organisation for Economic Cooperation and Development show that countries such as Israel, Denmark, Spain, Italy, and New Zealand, which had cigarette excise of over 75 per cent, also had illicit trade percentages of less than three per cent.
In fact, Carreras's Chairman Oliver W Holmes and Managing Director Marcus Steele have both recommended stronger border and port controls as a protection mechanism against the illicit trade and gave credit to the Jamaica Customs Agency and the police for their efforts which made a dent in the local illicit trade last year.
Health-wise, research from dozens of countries, including Jamaica, shows that increasing prices is the most-effective measure in reducing tobacco use among young people and adults, and in high income countries, a 10 per cent increase in cigarette prices corresponds to a four per cent reduction in overall tobacco use.
These are issues that the Ministry of Health and Wellness will need to consider as it moves towards preparing draft comprehensive tobacco legislation. The JCTC anticipates that Jamaica will become a party to the World Health Organization's Protocol to Eliminate Illicit Trade in Tobacco Products, which would require licensing, tracking and tracing, record-keeping, monitoring and regulating of Internet sales in order to reduce the impact of the illicit tobacco trade.
Dr Aggrey Irons is chairman of Jamaica Coalition for Tobacco Control. Send comments to the Observer or firstname.lastname@example.org.
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