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Curbing Illicit Trade in Tobacco Products

Tobacco control counterfeit products threaten legitimate business

ZONDWAYO DUMA writes

TOBBACO and its products may be frowned upon by many that tend to use the one-sided perspective that tobacco is bad for health. Whilst this perspective is true in its entirety, there is another aspect of tobacco that many are not aware about. Tobacco products are faced with a challenge of illicit trade. Illicit trade undermines the efforts that are being made by many world bodies and the country to ensure tobacco control with tobacco traded within the set laws and regulations. And so, to many, the anger against tobacco is fashioned towards the legal entities that are following the right channels to ensure they meet the set standards. Yet, the contempt should be directed to the illegal traders who do not follow the set tobacco control guidelines.

The Tobacco subsector remains an important industry for the country. According to the World Health Organization (WHO) agricultural land devoted to the harvesting of tobacco in Zambia increased over 350% in two decades from 1993 to 2013. This growth in land size entails that the sector has increased its contribution to GDP, currently employs …, pays K… in taxes and tobacco processing is one of the biggest subsectors in Zambian manufacturing. On this account the Zambian Government has singled out the tobacco industry’s development as a quick win for accelerated job creation under Section 16.8.1(b) of the Seventh National Development Plan (7NDP) and their role will be to facilitate involvement of the private sector in marketing and processing of tobacco.

Nonetheless, illicit tobacco trade has been on the rise, threatening public health gains of tobacco control and the outcomes of the WHO’s Framework Convention on Tobacco Control (WHO FCTC). In addition to threats on public health, illicit trade in tobacco products is a form of tax evasion, thereby causing a loss of government revenue.

Illicit trade in tobacco products is a chain of illegal activities that may include unlicensed production, smuggling of finished products, fraudulent marketing and claims of legal status and tax evasion. Often, illicit trade requires money laundering, corruption and various frauds and related crimes, to move the illicit goods and money through various transit and financial systems.

Perpetrators of illicit trade in tobacco products fall under the following broad categories:

Contraband – Tobacco products are produced legally but have been diverted after manufacture into an illegal market.

Counterfeit – Tobacco products are illegally produced and bear false manufacturing labels, unauthorized trademarks and trade names.

Cheap whites or illicit whites (sometimes referred to as “off brand”) – Are cigarettes legally produced in one jurisdiction for the sole purpose of being exported and illegally sold in a jurisdiction where they have no legitimate market.

Loose tobacco is a term applied to tobacco which may be used to illegally manufacture cigarettes or other tobacco products, such as “roll-your-own” tobacco, without payment of tax. Illicit loose tobacco can be misbranded or adulterated and may not meet regulatory standards. Because illicit trade occurs in shadow markets, the impacts on government revenue, businesses and consumers is seldom estimated. Indeed, the impacts of illicit trade manifested in forms such as: loss of public trust in the integrity of key Government and business sectors; poor product performance of counterfeit products associated with the

legible brand reducing integrity of well-established brands; eroded public trust in legitimate manufacturers who are mistakenly blamed by customers; unregulated manufacturing processes that lead to undeclared products for taxation but increased profits enabling illicit traders the financial muscle to expand into complementary criminal operations (including extortion, bribery etc); all tend to be very hard to quantify.

Various attempts are being made to address illicit tobacco trade. For instance, Zambia has signed the WHO FCTC protocol to eliminate illicit trade in tobacco products, though there is yet to be consensus on the means of implementation within various Government ministries. Regardless, addressing illicit trade in tobacco products is constrained by unavailability of relevant statistics. Since a publication of the World Bank in 1999, increased taxation has been adopted as a means of addressing illicit trade, but an unintended consequence has arisen such as an increase in illicit trade in cigarettes in countries such as South Africa.

To combat illicit trade not only in tobacco, an illicit trade task force comprising of Zambia Revenue Authority (ZRA), Zambia Police, Department of Immigration, Lusaka City Council, Drug Enforcement Commission, Anti-Corruption Commission, Office of the President and the Zambia Association of Manufacturers was launched in 2019. In line with the objectives of the task force activities to be undertaken include:

Carry out increased research on illicit trade to provide for evidence-based advocacy.

Conduct well-coordinated information driven operations.

Share information and actionable way forwards between different stakeholders.

The main outcomes envisaged from the task force operations will be increased policy interventions and actions towards addressing illicit trade in Zambia. Additionally, improved government revenue from tobacco and its products are anticipated as more traders become compliant with the guidelines as well as a better understanding by the public that legible firms are following the right channels and tobacco controls and thus the public should help in alerting authorities of illicit operations.

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