Apr 2015 Financial News

Tobacco black market a growing concern for T&T

Apr 10, 2015

Managing director of West Indian Tobacco (Witco) Jean-Pierre du Coudray is concerned about the rapidly expanding black market for tobacco products in T&T. He told the company’s shareholders it is one of the major challenges facing the company. “What we have seen in 2014 was a noticeable increase on the market of low priced brands which we believe are in our market illegally,” he said in his address at Witco’s 110th annual general meeting at the Hyatt Regency, Port-of-Spain, yesterday.

“The illicit trafficking of tobacco is a multibillion-dollar business today, fuelling organised crime and corruption, depriving governments of much needed taxes.” Du Coudray said there were also “unintended consequences” from the illicit trade, such as the low prices at which black market cigarettes are sold making it easier to get into the hands of minors.

He said: “We believe governments have a primary responsibility to tackle illicit trade through appropriate taxation policies, strong legislation and effective enforcement; we are willing to work with the authorities to address the matter as it is of great concern to us.” 

Later, in an interview with the T&T Guardian, Du Coudray explained that T&T is one of the highest excised countries in Caricom and this has created an opportunity for black market activity. He said the cigarette smugglers have a very strong competitive advantage because they are avoiding all the excise and import duties. 

“We have seen a lot of these brands coming in the market since 2010,” he said, linking that development to a 15 per cent increase in the excise duty on tobacco products introduced in the national budget for that year. Du Coudray said Witco is open to working with the authorities on solutions to the problem because the smugglers are making large profits and the more their smuggling and distribution lines gets established, the more difficult they will be to stop.

“These guys are very organised. We not talking suitcases here, we’re talking containers. It is organised crime, smuggling and networking,” he said. 

He said the black market was taking root in the three Caricom countries with the highest taxes on cigarettes: Jamaica, Suriname and T&T A fact sheet which accompanied Witco’s annual report showed that up to 600 billion cigarettes a year are illegal. That is up to 12 per cent of world consumption. Cigarettes are among the most common traded products on the black market due to high profit margins, relative ease of production and movement and low detection rates and penalties.

It is estimated that governments worldwide are losing up to US$40 billion a year in excise and other taxes as a result of that illicit trade. Du Coudray said Witco still managed to record a strong financial performance, with profit before tax of $655.1 million, because of “a very dynamic portfolio with three very strong brands: Dunhill, Du Maurier and Broadway.”

“Each of those brands have a very strong loyalty and a very strong relevance and although there are many cheap brands in the market, at the moment the strength of our brands seems to be dealing with that threat. “However, over time if the excise was to increase, or the economic situation worsens, you may find people having no choice but to move from our brands to the cheaper ones,” he said.

Source:
Suzanne Sheppard
Trinidad Guardian
Friday April 10, 2015

http://www.guardian.co.tt/business/2015-04-10/tobacco-black-market-growing-concern-tt