Tackling tobacco smuggling at
national and international
levels - the UK and FCTC
approaches
Andrea Crossfield
Director
Tobacco Free Futures, UK
www.illicittobacconorth.org
What we’ll cover
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The case for tackling illicit tobacco
The UK Government’s approach
Progress to date and future direction
Action at international level
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Why tackle illicit tobacco?
• Health – undermines other tobacco control measures
(e.g. price; health warnings; regulating and restricting
children’s access) Needs to be part of a comprehensive
tobacco control programme
• Crime – encourages crime at community, regional,
national and international levels. Seen as high profit and
low risk
• Economic impact – despite good progress UK national
revenue impact (lost tax) c£2bn p.a.
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Tobacco smuggling into UK:
up to 2000
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Tobacco smuggling:
beyond 2000
Market share of smuggled cigarettes
45%
40%
Projected market share if no action is taken
35%
30%
Projected market share with new measures
25%
and 5% real duty increase
20%
15%
10%
Actual market share following new measures
5%
0%
1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 20081997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
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Tax gap reduction – a successful
strategy
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Tackling tobacco smuggling:
key developments
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2000 £209 million over three years, 1000 more Customs officers /
investigators, additional x-ray scanners, tougher sanctions
2000 Legal action launched by EU in the US against tobacco companies for
‘an ongoing global scheme to smuggle cigarettes’
2002 UK Public Accounts Committee hearings expose Imperial Tobacco’s
involvement in smuggling
2004 EU drops legal action against PMI in return for legally binding
commitment to control sales of cigarettes and $1 billion
2006 Fines up to £5 million for tobacco manufacturers, focus on hand-rolled
tobacco
2008 Combined HMRC and UKBA strategy
2009 UK signed up to EU agreements with PMI and JTI
2010 agreements extended to BAT and Imperial Tobacco
2011 Refreshed HMRC and UKBA strategy
2012 Illicit Trade protocol to be adopted by WHO FCTC
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Refreshed 5-year UK strategy,
published 2011
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Shift in large UK seizures of
cigarettes
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2000 - mainly top-selling UK brands smuggled from the EU
2003 - counterfeit UK brands begin to appear
2007 - emergence of non-UK & cheap white brands
2011 - genuine UK brands fell to 3%, while non-UK brands make-up
over half of large seizures
2010/11
2002/03
28%
44%
41%
53%
3%
31%
Counterfeit
Genuine UK Brands
Other (including non-UK brands)
Counterfeit
Genuine UK Brands
NB – in this context a ‘large’ seizure consists of 100,000 cigarettes or 50kg HRT
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Other (including non-UK brands)
‘Illict whites’ - common brands
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World Bank analysis
• Tax and smuggling not necessarily linked
(contrary to industry messaging)
• High tax countries often have low % smuggled
tobacco and vice versa
• Linked more closely to levels of corruption and
tolerance of contraband sales
• Smuggling a result of inadequate international
controls
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But industry tells different story
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Role of the Framework
Convention on Tobacco Control
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Ratified in 2005; now has over 170 Parties
80% world population
70% world cigarette producers
70% world cigarette consumption
Over 60% cigarette exporters
Over 70% tobacco leaf producers
8 out of 11 mega countries including China,
Brazil, India, Japan; 26/27 MS of the EU
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Illicit Trade Protocol:
controlling the supply side
Increase downwards pressure on
smuggling through WHO FCTC illicit trade
protocol
• Tougher supply chain controls
• Tougher enforcement
• Greater international cooperation
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Illicit trade protocol: UK impacts
A comprehensive and widely adopted protocol on tobacco
smuggling could:
• Reduce smuggling in the UK by up to 80%
• Save 760 lives a year
• Increase taxes collected on tobacco by up to £1.3 billion
a year
ASH report: Cost Benefit Analysis of the FCTC Protocol on Illicit Trade in Tobacco Products
http://www.ash.org.uk/ash_7iqt6hvz.htm
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Key messages
• Illicit trade undermines tobacco policy and exacerbates
tobacco related health inequalities
• Also reduces government revenues and linked to wider
crime and terrorism
• Is used as an argument by the tobacco industry against
putting up taxes, but high tax does not necessarily
increase smuggling
• Also used as an argument against removing point of sale
displays and plain packaging
• The illicit trade ballooned out of control in the UK
because of tobacco industry tactics but is now on the
decline thanks to concerted action
• Action is needed at international, national and subnational levels
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Any questions?
andrea.crossfield@tobaccofreefutures.org
www.illicittobacconorth.org