Assessment of the European Union's illicit trade agreements with the four major transnational tobacco companies

Luk Joossens, Anna B Gilmore, Michal Stoklosa, Hana Ross

Research output: Contribution to journalArticle

11 Citations (Scopus)
102 Downloads (Pure)

Abstract

To address the illicit cigarette trade, the European Union (EU) has signed agreements with the four major Transnational Tobacco Companies (TTCs) that involve establishing extensive systems of cooperation. All agreements foresee two types of payments: annual payments (totalling US$ 1.9 billion over 20 years) and supplementary seizure payments, equivalent to 100% of the evaded taxes in the event of seizures of their products. While limited by the fundamental lack of transparency in this area, our analysis suggests that these agreements have served largely to secure the TTCs' interests and are threatening progress in tobacco control. The seizure payments are paltry and a wholly inadequate deterrent to TTC involvement in illicit trade. Despite the agreements, growing evidence indicates the TTCs remain involved in the illicit trade or are at best failing to secure their supply chains as required by the agreements. The intention of the seizure-based payments to deter the tobacco industry from further involvement in the illicit cigarette trade has failed because the agreements contain too many loopholes that provide TTCs with both the incentive and opportunity to classify seized cigarettes as counterfeit. In addition, the shifting nature of cigarette smuggling from larger to smaller consignments often results in seizures that are too small to qualify for the payments. Consequently, the seizure payments represent a tiny fraction of the revenue lost from cigarette smuggling, between 2004 and 2012, 0.08% of the estimated losses due to illicit cigarette trade in the EU. Our evidence suggests the EU should end these agreements.

Original languageEnglish
Pages (from-to)254-260
JournalTobacco Control
Volume25
Issue number3
Early online date28 May 2015
DOIs
Publication statusPublished - May 2016

    Fingerprint

Keywords

  • illicit cigarettes

Cite this