Scale of the problem

A 2009 study for the US organisation “Campaign for Tobacco-Free Kids ” estimated that 11.6% of all internationally traded cigarettes were illicit, equivalent to 657 billion cigarettes a year, causing losses to government revenue worldwide of US$40.5 billion.1 Illicit tobacco reduces the public health impact of tobacco tax rises and increases demand for tobacco products. In the UK, illicit tobacco rose by 2000 to a very high level: Customs & Excise (now HM Revenue and Customs) (mid-range) estimates were that 21 % of cigarettes in the UK market were illicit and 63 % of hand rolled tobacco was illicit,2 costing the Government more than £3 billion a year in lost revenue.3 However, following co-ordinated enforcement action in the UK and at European level, the level of illicit trade in the UK has subsequently fallen sharply. HM Revenue & Customs (mid-range) estimates for 2012/13 were that 9 % of cigarettes consumed in the UK were illicit, and the proportion of hand rolled tobacco that was illicit was 36%.4 Meanwhile, tobacco tax revenues have also continued to rise.5 The tobacco industry routinely uses the threat of illicit trade in lobbying against tobacco control measures, including rises in taxation and the introduction of standardised “plain ” packaging. Its publications focus on counterfeit tobacco products, rather than other forms of illicit trade described in the next section. Independent analyses suggest that tobacco industry funded surveys and studies such as Philip Morris International’s Project Star overestimate levels of illicit tobacco compared to UK Government data as a result of flawed methodology.6 7 8 Different types of illicit trade In relation to tobacco products, “illicit trade ” can cover a wide range of activities. Key categories include: a. Smuggling. This covers the unlawful movement of tobacco products from one jurisdiction to another, without applicable tax being paid. Therefore, smuggling may involve the movement of otherwise lawfully manufactured tobacco products, as for example when cigarettes are “diverted ” from their stated target market to another.