Illicit trade in tobacco causes loss of government revenue and increases health problems

15 Sep 2008

Solution: control the tobacco supply chain
For many countries tobacco smuggling causes huge revenue losses and increased health problems but it can be tackled by controlling the supply chain, a new paper has found.

Written by Luk Joossens (Framework Convention Alliance) and Martin Raw (University of Nottingham, UK), the paper — Progress in Combating Smuggling: Controlling the Supply Chain — looks at how three countries successfully tackled tobacco smuggling over the last decade.

According to the paper, controlling the supply chain (mostly dominated by the tobacco industry) is the key to tackling tobacco smuggling because supply must be cut off to the illicit market.

Governments have been working together to address the issue through a WHO treaty on tobacco and its associated protocol on illicit trade.

The WHO Regional Office for South East Asia and the Ministry of Health and Family Welfare of India, with the financial support of the Framework Convention Alliance, will co-host a regional workshop on the illicit trade in tobacco products in New Delhi India on the 15th and 16th September 2008.

The conference, which brings together delegates from the eleven countries of the South East Asia region, aims at raising awareness and sharing experiences, challenges and best practices among key government officials about the problem of illicit trade in tobacco products and to gather support for a strong protocol on illicit trade in tobacco products, which will be negotiated at the second session of the Intergovernmental Negotiating Body in October of 2008.

Governments lose huge amounts of tax revenue to the illicit tobacco trade each year – in 2006 this loss was estimated at US$40-50 billion globally more than the GDPs of two-thirds of the world’s countries[1] .

The illicit trade in tobacco also results in cheaper products, which means increased tobacco consumption and more health problems.

The paper provides evidence of the tobacco industry’s direct and indirect involvement in large scale cigarette smuggling, which was confirmed in recent settlements with two major tobacco companies in Canada in July 2008[2].

For example, in 2000 British American Tobacco (BAT) deputy chairman Kenneth Clark (a former British health minister) admitted: “Where any government is unwilling to act or their efforts are unsuccessful, we act, completely within the law, on the basis that our brands will be available alongside those of our competitors in the smuggled as well as the legitimate market”[3] .

The illicit trade in tobacco products includes practices  such as when containers of cigarettes are exported, legally and duty unpaid, to countries where they have no market and where they disappear into the contraband market.

The paper describes how cigarette smuggling fell from around 15 per cent to 1-2 per cent in Spain and Italy[4] , and from around 21 percent to 13 percent in the UK.[5]

“The examples from all three countries have one common factor — smuggling was reduced by interrupting the supply chain from the manufacturers to the illicit market,” said Laurent Huber, Director of the Framework Convention Alliance. “International cooperation was also crucial in Italy and Spain.”

Other examples of measures that were attributed to a fall in tobacco smuggling in these countries were: scanners for container detection; prominent fiscal marks on packs; increased punishment; financial penalties; more customs officers and action; international cooperation; and parliamentary hearings that exposed tobacco industry export practices.

On 20 October 2008 the second meeting of the International negotiating Body (INB2) on the illicit tobacco trade protocol of the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC) will discuss ways to tackle illicit trade in tobacco products.

The paper recommends that controlling the supply chain should be central to the FCTC’s protocol and bases its recommendations on the examples from Italy, Spain and the UK, which show how substantial reductions in smuggling were achieved over the last decade.

Download the paper: Progress in Combating Smuggling: Controlling the Supply Chain –  (

The Framework Convention Alliance is made up of over 350 organizations from more over 100 countries around the world. It was created to support the development, ratification, and implementation of the WHO FCTC. For more information, including a list of members, visit

[1]  Framework Convention Alliance, How big was the illicit trade problem in 2006? (Geneva 2007),

[2]  Canada Revenue Agency. Federal and provincial governments reach landmark settlement with tobacco companies. Québec, Canada Revenue Agency, Press release, July 31 2008,

[3] Clarke K. Dilemma of a cigarette exporter. Guardian, 3 February 2000.

[4]   ERC Group. World cigarettes 1. The 2007 Survey: Italy and Spain. Suffolk, ERC, 2007.

[5]  HM Customs & Excise. Tackling Tobacco Smuggling. London, HM Treasury, 2000; and HM Revenue & Customs. Departmental Autumn Performance report 2007. London, HM Treasury, 2007.

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