Big Tobacco Fined for Fueling Black Market in U.K.
November 17, 2014
For years, the major tobacco companies have fought cigarette tax increases and other tobacco control measures by claiming they will spark massive increases in cigarette smuggling and black markets. But stories in The Wall Street Journal (subscription only), The Guardian and other media reveal that British American Tobacco (BAT), the world’s second largest multinational tobacco company, has been supporting – and profiting from – the same cigarette smuggling schemes that tobacco companies claim are caused by policies to reduce tobacco use.
According to the article, U.K. regulators have fined BAT $1.03 million for oversupplying cigarettes into the low-tax Belgium market to be smuggled back into the U.K., where tobacco taxes are much higher. This tactic violates U.K. law.
For years, tobacco companies have argued against virtually any policy to reduce tobacco use by claiming that it will lead to an increase in illicit trade. But the Wall Street Journal article adds to already-established evidence that tobacco companies themselves often encourage illicit trade as a way to increase profits.
'For years, politicians in the U.K. and other parts of the European Union have alleged that tobacco companies effectively endorse smuggling by intentionally oversupplying cigarettes in low-tax jurisdictions, knowing they will be purchased there and brought back to higher-tax regions,' the article states.
The tobacco companies’ long history of relying on the illegal sales of cigarettes has been documented in Africa, Asia, Europe, the Middle East, South and Central America, Canada and the U.S. Internal documents show that tobacco executives have coordinated with distributors directly in charge of smuggling to discuss details of the smuggling operations, including destinations, brands, routes, quantities and prices. Tobacco companies have also knowingly supplied tobacco products used in cigarette smuggling operations by illegal drug traffickers seeking to launder money.
Tobacco use is the world’s leading cause of preventable death. Tobacco killed 100 million people in the 20th century and is projected to kill one billion people in the 21st century unless governments act now to prevent it. The good news is that we know how to win the fight against tobacco. Science and experience have identified proven, cost-effective solutions, including tobacco tax increases, comprehensive smoke-free laws, graphic health warnings, and bans on tobacco advertising, promotions and sponsorships.
Although tobacco companies and industry-funded organizations argue that tobacco taxes and other proven measures greatly increase illicit trafficking, independent research shows otherwise.
Even if some illicit trade does occur, governments that implement tobacco control measures succeed in reducing tobacco use, saving lives and, in the case of tobacco taxes, raising revenue. The best responses to illicit trade are to strengthen tax collection efforts, support law enforcement and implement stronger criminal penalties.
Incidents like the U.K. fine on BAT show policymakers that the tobacco industry is not a credible voice in conversations about illicit trade or public health.