An analysis of the illicit tobacco trade: the influence of the effectiveness of administrative enforcement and high taxation on illicit trade

Year 2023, , 1 - 6, 08.06.2023

Yumiko Yokoyama , Faruk Güven

https://doi.org/10.58588/aru-jfeas.1164606

Abstract

Even though tobacco products are commonly legal substances, the illicit tobacco trade is one of the largest among other illegal products and services. Although high taxation is often blamed for the development of illicit tobacco trade, it is the strength and efficiency of the regulatory framework that should form the focus attention when investigating the control of illicit trade. This secondary based research aims to analyse the relationship between the estimated size of illicit tobacco trade and the strength of enforcement, together with the influence of taxation on illicit tobacco trade. The results demonstrate that the size of illicit tobacco trade tends to be smaller where countries have strong enforcement capability. Moreover, countries with strong enforcement capability can also increase taxation on tobacco products while suppressing the development of illicit tobacco trade. Finally, as illicit tobacco products are mainly traded across borders, the weak law enforcement of some governments can undermine the international effort to eradicate illicit tobacco trade.

Keywords

Illicit Tobacco Trade, High Taxing, Law Enforcement

Yasadışı tütün ticaretinin bir analizi: idari yaptırım ve yüksek vergilendirmenin etkinliğinin yasa dışı ticaret üzerindeki etkisi

Abstract

Tütün ürünleri genellikle yasal maddeler olsa da yasa dışı tütün ticareti diğer yasa dışı ürün ve hizmetler arasında en büyüklerinden biridir. Yasa dışı tütün ticaretinin gelişmesi için genellikle yüksek vergilendirme suçlansa da yasa dışı ticaretin kontrolü araştırılırken odak noktası düzenleyici çerçevenin gücü ve etkinliği olmalıdır. Bu ikincil temelli araştırma, yasa dışı tütün ticaretinin tahmini büyüklüğü ile yaptırım gücü arasındaki ilişkiyi, vergilendirmenin yasa dışı tütün ticareti üzerindeki etkisiyle birlikte analiz etmeyi amaçlamaktadır. Sonuçlar, yasa dışı tütün ticaretinin boyutunun, ülkelerin güçlü yaptırım kapasitesine sahip olduğu yerlerde daha küçük olma eğiliminde olduğunu göstermektedir. Ayrıca, güçlü uygulama kabiliyetine sahip ülkeler, yasadışı tütün ticaretinin gelişimini bastırırken tütün ürünleri üzerindeki vergileri de artırabilir. Son olarak, yasadışı tütün ürünleri esas olarak sınır ötesi ticareti yapıldığından, bazı hükümetlerin zayıf kanun uygulamaları, yasadışı tütün ticaretini ortadan kaldırmaya yönelik uluslararası çabaları baltalayabilir.

Keywords

Tütün, Vergi, Yasadışı Ticaret

References

• Abadinsky, H. (2010). Organized Crime (9th ed.). Wadsworth.
• Acemoglu, D., & Jackson, M. O. (2017). Social norms and the enforcement of laws. Journal of the European Economic Association, 15(2), 245–295. https://doi.org/10.1093/jeea/jvw006
• Alvarez & Marsal. (2021). Causes and control of illegal tobacco. https://www.alvarezandmarsal.com/sites/default/files/causes_and_control_of_illegal_tobacco_-_third_edition_2021.pdf
• Assunta, M. (2021). Global tobacco industry interference index 2021. Global Center for Good Governance in Tobacco Control. https://exposetobacco.org/wp-content/uploads/GlobalTIIIndex2021.pdf
• Chapoupka, F. J., Edwards, S. M., Ross, H., Diaz, M., Kurti, M., Xu, X., Pesko, M., Merriman, D., & DeLong, H. (2015). Preventing and reducing illicit tobacco trade in the United States. Centers for Disease Control and Prevention. https://www.cdc.gov/tobacco/stateandcommunity/pdfs/illicit-trade-report-508.pdf
• Dutta, S. (Ed). (2019). Confronting illicit tobacco trade: global review of country experiences. World Bank Group. Euromonitor International (2018, November). Illicit trade in tobacco products. https://www.euromonitor.com/illicit-trade-in-tobacco-products/report
• Financial Action Task Force (2012). FATF report: illicit tobacco trade. https://www.fatfgafi.org/media/fatf/documents/reports/Illicit%20Tobacco%20Trade.pdf Gallagher, A. W. A., Evans-Reeves, K. A., Hatchard, J. L., & Gilmore, A. B. (2019). Tobacco industry data on illicit tobacco trade: a systematic review of existing assessments. Tobacco Control, 28(3), 334–345. https://doi.org/10.1136/tobaccocontrol-2018-054295
• Gallagher, A. W. A., & Gilmore, A. B. (2019). Euromonitor International now accepts tobacco industry funding: a win for PMI at the expense of research on the tobacco industry. Tobacco Control. https://blogs.bmj.com/tc/2019/04/08/euromonitor-international-now-accepts-tobacco-industry-funding-a-win-for-pmi-at-the-expense-of-research-on-the-tobacco-industry/
• Gilmore, A. B., Gallagher, A. W. A., & Rowell, A. (2019). Tobacco industry’s elaborate attempts to control a global track and trace system and fundamentally undermine the illicit trade protocol. Tobacco Control, 28(2), 127–140. https://doi.org/10.1136/tobaccocontrol-2017-054191
• Gu, C., Roth, A. E., & Wu, Q. (2022). Forbidden transactions and black markets. Mathematics of Operations Research, 47(4), 3084-3109. https://doi.org/10.1287/moor.2021.1236
• Joossens, L., Chaloupka, F. J., Merriman, D., & Yurekli, A. (2000). Issues in the smuggling of tobacco products. In: J. Prabhat & F. J. Chaloupka (Eds.), Tobacco control in developing countries (pp. 393–406). World Bank.
• Joossens, L., & Raw, M. (2012). From cigarette smuggling to illicit tobacco trade. Tobacco Control, 21(2), 230–234. https://doi.org/10.1136/tobaccocontrol-2011-050205
• Moksony, F. (1999). Small is beautiful. The use and interpretation of R2 in social research. Review of Sociology, (Special issue), 130–138.
• Nguyen, H. T. T., Giang, L. T., & Pham, T. N. (2020). Empirical analysis on the illicit trade of cigarettes in Vietnam. Tobacco Control, 29(4), 281–286. https://doi.org/10.1136/tobaccocontrol-2019-055598
• OECD. (2022). Recommendation of the council on countering illicit trade: enhancing transparency in free trade zones. https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0454
• OECD/EUIPO. (2018). Why do countries export fakes?: the role of governance frameworks, enforcement and socio-economic factors. OECD Publishing. https://doi.org/10.1787/9789264302464-en
• Onogwu, D. J. (2018). Corruption and the efficiency of customs clearance process in selected countries. Review of Pubic Administration and Management, 6(3). https://doi.org/10.4172/2315-7844.1000257
• Ross, H., & Blecher, E. (2019). Illicit trade in tobacco products need not hinder tobacco tax policy reforms and increases [White Paper]. Tobacconomics. https://www.tobacconomics.org/files/research/554/Illicit-Tobacco-White-Paper_v1.5-2.pdf
• Roth, A. E. (2007). Repugnance as a constraint on markets. Journal of Economic Perspectives, 21(3), 37–58. https://doi.org/10.1257/jep.21.3.37
• Scollo, M. (2021). Arguments against tax increases promoted by the tobacco industry. In E. M. Greenhalgh, M. M. Scollo, & M. H. Winstanley (Eds.), Tobacco in Australia: facts and issues. Cancer Council Victoria. https://www.tobaccoinaustralia.org.au/chapter-13-taxation/13-10-arguments-against-tax-increases-by-tobacco-industry
• Ulep, V. G., Lavares, M. P., & Francisco, A. (2021). Measuring the capacity to combat illicit tobacco trade in 160 countries. Globalization and Health, 17(130). https://doi.org/10.1186/s12992-021-00783-4
• University of Bath (2021a). Influencing science: commissioning research and reviews. Tobacco Tactics. https://tobaccotactics.org/wiki/influencing-science-commissioning-research-and-reviews/
• University of Bath (2021b). Interference by the tobacco industry and its allies. Tobacco Tactics. https://tobaccotactics.org/wiki/international-tax-and-investment-center
• University of Bath (2021c). Tobacco smuggling. Tobacco Tactics. https://tobaccotactics.org/wiki/tobacco-smuggling/
• Vellios, N., van Walbeek, C., & Ross, H. (2020). Illicit cigarette trade in South Africa: 2002–2017. Tobacco Control, 29(4), 234–242. http://dx.doi.org/10.1136/tobaccocontrol-2018-054798
• Von Lampe, K. (2016). Organized Crime: Analyzing Illegal Activities, Criminal Structures, and Extra-Legal Governance. SAGE.
• World Bank. (2018). Logistics performance index: Overall (1=low to 5=high). https://data.worldbank.org/indicator/LP.LPI.OVRL.XQ
• World Bank. (2019). Confronting illicit tobacco trade: a global review of country experiences. https://documents1.worldbank.org/curated/en/677451548260528135/pdf/133959-REPL-PUBLIC-6-2-2019-19-59-24-WBGTobaccoIllicitTradeFINALvweb.pdf
• World Bank. (2020). Enhancing government effectiveness and transparency: the fight against corruption. https://documents1.worldbank.org/curated/en/235541600116631094/pdf/Enhancing-Government-Effectiveness-and-Transparency-The-Fight-Against-Corruption.pdf
• World Customs Organization. (2017). WCO News: council 2017, transit, e-commerce, fragile borders. https://mag.wcoomd.org/uploads/2018/05/WCO_News_84_2.pdf
• World Health Organization. (2014). Raising taxes on tobacco. https://www.euro.who.int/en/health-topics/disease prevention/tobacco/world-no-tobacco-day/2014-raise-taxes-on-tobacco
• World Health Organization. (2015). Combatting illicit trade. https://www.euro.who.int/en/healthtopics/diseaseprevention/tobacco/publications/key-policy-documents/who-framework-convention-on-tobacco-control-who-fctc/key-areas-of tobacco-control-policy/combatting-illicit-trade
• World Health Organization. (2021). WHO report on the global tobacco epidemic, 2021: addressing new and emerging products. https://www.who.int/publications/i/item/9789240032095