Illicit trade report on tobacco disproved

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The Southeast Asia Tobacco Control Alliance (Seatca) has disproved a new tobacco industry research funded by a giant cigarette firm on illicit trade in 14 Asian countries, including the Philippines.

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The giant tobacco firm funded a second research on illicit trade of tobacco products in Asia, called “Asia-14 Illicit Tobacco Indicator” which was carried out jointly by a Washington-based group, International Tax and Investment Center (ITIC), and a UK group, Oxford Economics (OE).

“It is no surprise that the findings of this research, like its predecessor [Asia-11 Illicit Tobacco Indicator 2012], are pro-tobacco industry, Seatca said.

The Asia-14 Report said the 341.2 percent excise tax increase (2.72 pesos to 12 pesos) in the Philippines last January 1, 2013 was the main driver of the alleged large volume increase in Illicit Consumption at 198 percent or 18.1 percent of Total Consumption.

An alleged 89.8 percent of Illicit Consumption and 16.3 percent of Total Consumption in 2013 was attributed to Domestic Illicit Consumption, which was estimated to have grown to 11 billion cigarettes based on the Asia-14 Report.

Like its predecessor (Asia-11 Illicit Tobacco Indicator 2012), the research findings are biased in favor of an international tobacco company, Seatca said.

Seatca pointed out in its critique that the Asia-14 Report failed to highlight significantly higher tax revenues after the 2013 excise tax increase.

For tobacco excise alone, the Philippine government collected P70.4 billion, higher by 113.7 percent compared to 2012.

Excise revenue gains were therefore 454 percent higher than the Asia-14 Report’s estimated excise tax losses in 2013.

In effect, Seatca’s critique disproved allegations that the Bureau of Internal Revenue (BIR) was losing revenues through illicit tobacco trade.

BIR Commissioner Kim Henares earlier said the overwhelming growth in sin tax collection was an indication of the inconclusiveness of the Asia-14 report alleging the fast-rising illegal cigarette trade in the country.

According to the main reviewer of the research, Prof. Hana Ross, Principal Research Officer of the Economics of Tobacco Control Project at the University of Cape Town, “The Asia-14 report fails to provide scientifically sound and unbiased information to policy makers and other tobacco market stakeholders.

“The reason for this is simple. The figures and statistics it reports are products of either incorrect or unverified/unverifiable estimation methods applied to often questionable data from multiple sources that do not blend,” Ross said, adding “that the quality of the original data collection is questionable due to the lack of representativeness and possibly intended bias. Many secondary data come from sources with an obvious conflict of interest.”

“More seriously, the report is full of errors and mistakes, which is surprising given the ‘commercial’ quality of the results. For example, the report does not make any distinction between smoking incidence and smoking prevalence, even though these are two very different concepts. It also confuses ‘sales’ and ‘consumption,’ two fundamental concepts on which the calculations are based.”

Ross said, “While illicit tobacco trade is a problem that requires government attention, it is often blown out of proportion and out of context by the tobacco industry in order to discourage governments from increasing tobacco taxes and implementing other regulatory measures.”

Dr. Ulysses Dorotheo, Seatca’s FCTC program director, said, “Governments should reject partnerships and non-binding agreements with the tobacco industry to solve illicit trade. Instead, governments should secure the supply chain in accordance with measures contained in the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products, which was adopted in 2012 by the 180 Parties to the WHO Framework Convention on Tobacco Control (FCTC).

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