5 factors that promote illegal tobacco trade according to the WHO

Illicit tobacco trade is a menace in Pakistan as well as countries around the globe. It has many disadvantages to it, which start from discouraging legitimate businesses and investors to evasion of billions in taxes. The share of illicit cigarettes in Pakistan has grown manifold over the years as well and according to some experts, they now occupy a staggering 40% of the market share.

This brings us to the next and a very important question– what do we do about illicit tobacco trade and how do we address the problem at hand? Well, fortunately there is a UN report on the topic which deals extensively in how you need to carter to the pandemic.

One of the factors highlighted by the report is the “weak governance and lack of high-level commitment” to tackle the menace. For instance, when a government is not fully committed to cracking down on illegal and illicit trade, the illicit trade continues unabated.

When authorities look the other way, it gives illegal manufacturers the encouragement to go ahead with their operations without any fear of being caught.

The second reason cited by the report is that of “ineffective customs and excise administration”. It is strictly the responsibility of the customs and excise authorities in the country to ensure that smuggling and the sale of counterfeit products should not continue unabated in Pakistan.

It is the responsibility of these authorities to ensure that these products are legitimate, taxed and distributed in the market with the minimum fixed price.

The third reason cited in the UN report is the corruption and complicity of cigarette manufacturers. When cigarette manufacturers are complicit in coming up with illegal cigarettes and hide their practices from the government, it ends up damaging the economy and ends up increasing their profits.

The fourth reason is the presence of informal sectors and distribution channels that ensure illicit tobacco trade goes on unabated across the country. For instance, the presence of illegal factories and retail outlets that are in on the sale of illicit tobacco and cigarettes ensures this practice continues with impunity.

The last reason outlined in the report deals with population perceptions and socio economic status of the masses. If the masses are not well off, they will opt for cigarettes that are available for cheap cost albeit a bit low in quality. However, if the masses in a country enjoy a good standard of living, then they not compromise on illicit brands and instead, opt for only the high quality ones.

Conclusion:

This is what the report contained in its conclusion:

“The characteristics of the illicit tobacco market can be vary depending on country conditions. It can include a mix of illegal manufacturing, illicit importation, and smuggling-out.

The link between tax differences and large scale illicit trade is weak, rather enabling factors such as weak administration are important.

Many countries are increasing tax rates on cigarettes and earning higher tax revenues, despite the presence of illicit trade. Countries are beginning to protect their tax revenues by introducing strong
measures to control activities and monitor production.

The new Protocol in aims to eliminate all forms of illicit tobacco trade by requiring Parties to take measures to control the supply chain and to cooperate internationally on a range of matters.

It is important to keep in mind that illegal cigarette trade damages and bleeds the economy of a country. One must ensure that he/she does not encourage or promote illicit tobacco trade knowingly or unknowingly.

Not only does it rob our country of billions in taxes, it also results in criminal activities as a result which harms the country in the long-run.