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Illegal cigarettes cost $210m in lost taxes in GCC

DUBAI, November 12, 2018

Illicit trade of cigarettes in the GCC has tripled in the first half of 2018 rising to 5.3 per cent of total sales compared to last year, equivalent to approximately $210 million in lost taxes, a report said.

Philip Morris International (PMI), a leading international tobacco company, has collaborated with Oxford Economics to monitor and analyse total consumption, domestic sales, and lost tax revenues due to illicit trade in the GCC region.

According to study, in 2017 over 695 million cigarettes (about 1.6 per cent of total sales consumed) were illegally sold in the region.

Tamer Shabana, director of Illicit Trade Prevention at Philip Morris Management Services (Middle East), commented: “The largest increase in illicit trade of cigarettes has been in Saudi Arabia, where 6.6 per cent of all cigarettes consumed are illicit. But the report shows that every government in the region has been impacted to some degree by significant net revenue losses due to illegal sales of cigarettes.”

Total consumption of cigarettes in Saudi Arabia fell from 34 billion in 2015 to 27.5 billion in 2017, signifying a general decline in smoking prevalence. Nevertheless, illicit cigarettes consumption rose from 484 million cigarettes in 2016 to 571 million in 2017, the highest ratio (6.6 per cent) anywhere in the region.  This is likely to rise even higher by the end of the year based on the 2018 Q2 empty packet survey analysed by Oxford Economics. The report also points out that Illicit consumption in the region consists entirely of non-domestic illicit cigarettes (i.e., imports).

“Illicit trade in cigarettes is a complex issue that requires unified efforts among governments, law enforcement and the private sector to effectively tackle the challenges,” Shabana added.

“For example, joint efforts between GCC law enforcement agencies concerning fighting illicit trade should be enhanced. Harmonized tax structures across the GCC markets will also reduce cross boarder smuggling, and applying a specific tax structure, meaning a fixed monetary value applied to the same number of cigarettes sticks, has been proven in many countries to address both the revenue and health objectives of governments. Finally, continuous cooperation between the public and private sectors in order to effectively fight illicit trade.”

 According to the Oxford economics report the GCC countries that have applied excise taxes were affected more by illicit trade penetration while Kuwait, for example, which has not yet applied excise tax, was the least affected during the period under review with less than 1 per cent of all sales.

PMI has taken an active stance in combating illicit trade in cigarettes in the region. The company will be participating in the Middle East Anti Illicit Trade exhibition in Abu Dhabi in November, one of the most prominent events focusing on preventing illicit trade in the GCC. – TradeArabia News Service




Tags: Oxford | Philip Morris |

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