Analysis of the illicit tobacco market in Georgia in response to fiscal and non-fiscal tobacco control measures

How much to pay for a track and trace system: a simulation model for South Africa

BACKGROUND

The illicit trade in tobacco reduces the effectiveness of tobacco-control policies. Independent track and trace (T&T) systems are considered one of the most effective measures available to reduce the illicit tobacco trade. South Africa, with an illicit trade estimated at over 35% of the total market, is yet to implement a T&T system.

METHODS

An Excel-based simulation model is used to determine the break-even T&T marker cost per pack. At the break-even cost per pack, the government would recover all costs associated with implementing T&T by collecting additional revenues. We conduct a scenario analysis to provide a range of break-even marker costs.

FINDINGS

A marker cost of between R2.68 (US$0.17) and R5.24 (US$0.34) per pack allows the South African government to collect enough additional revenue to recover all costs associated with T&T. Implementing such a system would reduce cigarette consumption by between 5% and 11.5%. Given that comparable systems cost significantly less than this range (roughly US$0.02 per pack), the government would in all likelihood be able to implement a system at a cost below the break-even rate, thus generating additional revenue.

CONCLUSION

The break-even simulation model provides a practical tool for the government to plan the implementation of T&T and to set up an evaluation criteria for the T&T tender process. The simulations illustrate that implementing T&T in South Africa would both reduce consumption (licit and illicit) and generate additional revenue. With some modifications, the model can be applied to other countries as well.

Illicit cigarette market in Georgia: potential impacts on smoking prevalence and tax revenues

OBJECTIVES

This study aims to examine the impact of taxation measures implemented between 2017 and 2019 on the illicit cigarette market in Georgia and to assess the potential effects of its full elimination on smoking rates and tax revenues.

STUDY DESIGN

This was a cross-sectional and observational study.

METHODS

The study uses the gap analysis method to estimate the size of the illicit market by comparing self-reported cigarette consumption with tax-paid cigarette sales. Potential changes in cigarette consumption are calculated using estimates of price demand elasticity and the price difference between licit and illicit cigarettes. The applicable excise tax is then applied to the estimated change in licit cigarette consumption to determine the potential change in tax revenues.

RESULTS

In 2020, illicit cigarettes accounted for 6.4% of the market, which decreased to 0.6% in 2021. Eliminating the illicit cigarette market could potentially reduce the number of smokers by 0.5% in 2020 and 0.1% in 2021. It could also lead to a 2.8% increase in excise tax revenues in 2020 and a 0.2% increase in 2021. The study highlights a notable shift in consumer behavior since 2019 toward smoking roll-your-own (RYO) cigarettes.

CONCLUSIONS

Tax increases did not have a significant impact on the size of the illicit market in Georgia. The shift in consumer preference toward RYO cigarettes may explain why the illicit cigarette market did not expand after the tax hikes. However, this shift diminishes the effectiveness of taxation policies in reducing smoking rates and leads to a decline in excise tax collection.

Tobacco industry corporate social responsibility activities and other interference after ratification of a strong tobacco law in Ethiopia

BACKGROUND

Since strict new tobacco control laws were introduced in 2019 and 2020, the National Tobacco Enterprise (NTE), the main manufacturer and distributor of cigarettes in Ethiopia, strategically engaged in corporate social responsibility (CSR) activities and other tactics to interfere in tobacco control policymaking. This study systematically identified and reviewed tobacco industry activities that undermine Ethiopia's strict new tobacco control laws.

METHODS

We collated, reviewed and analysed evidence on tobacco industry CSR activities from February 2019 to November 2022 in Ethiopia, including newspapers, organisational websites, social media and government documents related to tobacco industry activities, contract agreements and other policy interference attempts.

RESULTS

NTE's CSR activities included: (1) Funding educational programmes (eg, postgraduate scholarships); (2) Community service (eg, donating COVID-19 prevention materials, providing water, sanitation and hygiene supplies); and (3) Supporting government programmes (eg, greening initiatives and training programmes). NTE facilitated CSR activities via a contract agreement with the Ethiopian government that was created when Japan Tobacco International purchased the Government's majority share in NTE. NTE subsequently partnered with the Japanese Embassy in Addis Ababa and private law firms on CSR activities. The tobacco control community stopped NTE distributing free COVID-19 prevention products in Addis Ababa but had limited impact on other identified breaches of laws prohibiting tobacco advertising promotion and sponsorship.

CONCLUSION

The new laws have not stopped NTE using multiple CSR activities to interfere in tobacco control policy. Regular monitoring of tobacco industry CSR activities to identify potential breaches is recommended. Moreover, the Ethiopian government should revise its contractual agreement with NTE to end NTE's participation in law-making processes and partnerships on illicit tobacco control.

Response of legal and illegal cigarette prices to a tax increase in Ethiopia

BACKGROUND

In 2020, Ethiopia passed a landmark tax proclamation implementing an evidence-based mixed excise system aimed at curbing tobacco use. This study evaluates the impact of the tax increase of more than 600% on both legal and illegal cigarette prices in order to gauge the impact of the tax reform in the presence of a sizeable illicit cigarette market.

METHODS

Data on 1774 cigarette prices were obtained from retailers during Empty Cigarette Pack Surveys in the capital and major regional cities conducted in 2018 and 2022. Packs were categorised as 'legal' or 'illicit' using criteria from the tobacco control directives. Descriptive and regression analyses were used to study the cigarette price changes during the period of 2018-2022, capturing the impact of the 2020 tax increase.

RESULT

Prices of both legal and illegal cigarettes increased in response to the tax increase. In 2018, the stick prices ranged from ETB0.88 (Ethiopian birr) to ETB5.00 for legal cigarettes while they ranged from ETB0.75 to ETB3.25 for illegal ones. In 2022, a legal stick sold for ETB01.50-ETB2.73 and an illegal stick for ETB1.92-ETB8.00. The average real price of legal and illegal brands increased by 18% and 37%, respectively. The multivariate analysis confirms that prices of illicit cigarettes grew faster compared with the legal ones. By 2022, illicit brands were on average more expensive compared with their legal counterparts. This result is statistically significant at p<0.01.

CONCLUSION

The prices of both legal and illegal cigarettes increased following the 2020 tax increase, with the average real cigarette price increasing by 24%. As a result, the tax increase likely had a positive impact on public health despite a sizeable illicit cigarette market.

Illicit trade in tobacco products: recent trends and coming challenges

BACKGROUND

Illicit trade in tobacco products is a menace to the goal of eliminating tobacco consumption. Although tax policy is very effective in reducing consumption, illicit trade can reduce (though not eliminate) its effectiveness.

METHODS

This article discusses the recent evolution of illicit trade and the context in which it occurred; the new methods that have been developed to measure it and, finally, the challenges in the next phase in the control of illicit trade.

RESULTS

There has been a remarkable stability in the penetration of cigarette illicit trade in the past decade. Such a stability, however, occurred in a world of shrinking tobacco consumption, implying a decreasing absolute illicit trade. Most countries have progressed in increasing tobacco taxes and changing tax structures. Prices of illicit cigarettes follow legal cigarette prices. Concomitantly, many new studies, independent from the tobacco industry, have been conducted allowing for better understanding of the illicit trade and providing inputs to its solution. The entry into force of the WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products provides both a global and a national policy framework to further curb illicit trade. Instruments such as track-and-trace systems must be promoted and adopted to maximise reductions in illicit trade.

CONCLUSIONS

Global efforts to curb the illicit trade in tobacco products are gaining momentum and progress has been made in many parts of the world. The next decade can witness a decisive decrease in tobacco consumption, both licit and illicit, if countries further engage in international collaboration.