Tobacco Smuggling Costs Nigeria over N250 Billion in Unpaid Taxes Annually

Source from:  Daily Times 10/20/2015

When the new law was made public, not a few smokers found themselves behind police counters for 'smoking' in the public. The rumour made the rounds at the time that smoking in public places was banned in Lagos State; the misinformation was orchestrated in the press also and the outcome is now history.

When the new law was made public, not a few smokers found themselves behind police counters for 'smoking' in the public. The rumour made the rounds at the time that smoking in public places was banned in Lagos State; the misinformation was orchestrated in the press also and the outcome is now history.

But head of litigation and regulation at the British American Tobacco Nigeria, Mr. Sola Dosunmu, in a parley with journalists in Lagos recently said that was never the case.

"The bill in Lagos actually dealt with public health and life; you are allowed to smoke on the streets, on the roads and on the highways, but the interpretation of 'public places' was assumed to be just about anywhere people are sitting down, standing up or hanging out.

The law even recommended that hotels, hospitals, eateries etc, should dedicate 10% of their premises for smokers. Now it's up to the smokers in the society to either smoke in prescribed public places or out of sight of policemen," Dosunmu said.

Illegal tobacco trade: the facts and figures

Illegal tobacco comprises three categories of illegal activity:

Counterfeit cigarettes: They are likely to contain many times the levels of tar and carbon monoxide found in genuine cigarettes, and in some cases can contain insects and human faeces. The vast majority of fakes come from illegal operators in China, Paraguay, the Middle East, and Eastern Europe.

Smuggled genuine product: These are products manufactured for a certain market or country, but find their way illegally into another market.Or are products carried into the country by passengers returning from a trip abroad and which are far in excess of the customs allowance for individuals. Taxes due to governments are evaded as a result.

Illicit whites: Cigarettes that are generally legally produced in a market primarily to be smuggled into another market where they have limited or no legal distribution. The growths of illicit whites pose the most significant threat.

You can easily sit down in your room; place an order for counterfeit product, say, like Benson & Hedges from China. You send a picture showing them how the packet and stick of the product are; you pay for it by bank transfer and when they receive payment the product will be sent via the high seas and all you do is to clear when it arrives. It has become an art and as easy as that.

In a spirited effort to raise awareness of the facts around the illegal tobacco trade which coincided with the WHO's World No Tobacco Day onSunday 31 May, BAT has developed a new campaign to showcase the nature and scale of the illegal tobacco trade, and the approaches required to tackle it which vary from country to country.

However, if all the different organisations involved in the illegal tobacco trade around the world were combined into one conglomerate, it is envisaged that the company would become the third largest international tobacco company by internal revenue generation.

The campaign portrays this fictional tobacco conglomerate — International Tobacco Smugglers Inc. (ITSI) — profiling the criminal supply chain and how these people are working together on an international scale in sophisticated, highly organised, criminal networks to manufacture, transport and distribute tobacco products illegally.

These people include the persons selling cigarettes for pocket money prices in local neighbourhoods and the transport specialist who ships illegal tobacco products from country to country, through to the wealthy 'king pin' who is in overall control.

Freddy Messanvi, BAT's legal and external affairs director, puts it this way: "The impact of illegal tobacco may not be felt as immediately and directly as other crimes, but the consequences are very real. By some estimates, illegal tobacco costs governments around the world $40-$50 billion each year in unpaid tobacco taxes.

"In West Africa, it is estimated to cost about $774 million to governments across the region. Coming closer home, in Nigeria, this implies that illicit activities attributes to the shortfall in government revenue from tobacco sales by an underestimation of over N216 billion paid in taxes to the Nigerian government which could have been higher.

Smuggling not a lesser crime

Authorities see it as a lesser crime. It's not a crime that somebody is shot for because nobody dies. They think nobody suffers when they smuggle tobacco products but unfortunately, there are victims of these products. When they are smuggled in, government loses millions of dollars from revenue; the tobacco manufacturers themselves will suffer; the smokers themselves will suffer.

Illegal tobacco and terrorism

A crucial fact to note also is that sales of illegal tobacco have been reported to fund human trafficking, drug and arms trades as well as terrorist organisations globally.

A study in Europe has linked tobacco smuggling to terrorism, child trafficking and drug trafficking. It was found that those who smuggle tobacco use the money to fund terrorism and trafficking of persons and hard drugs across the globe.

Combating the menace

According to Messanvi, BAT has been operating in Nigeria since 2003. "In the 15 years of our operations in Nigeria, we have shown commitment to the Memorandum of Understanding (MOU) signed with the Nigerian Government to regularise the tobacco sector, support sustainable Foreign Direct Investments (FDI) and contribute to socio-economic development in Nigeria.

"Our partnerships with government agencies have yielded a significant reduction in (the) incidence of illicit tobacco products in Nigeria with a reduction from about 80% share of market when we first came in to less than 20% as at 2015, thereby supporting the reclaiming of government revenue lost through illegal tobacco marketing channels. Though a significant achievement, we believe there is still work to be done in this area.

"The amount of illegal tobacco is much more significant than is generally realised: an estimated 400-600 billion cigarettes, the equivalent of approximately 10-12% of world consumption globally and in West Africa about 60 billion cigarettes which is about 10% of the global illicit trade.

"It is a transnational, multi-faceted issue and one that requires a collaborative approach, from governments and law enforcement agencies with whom we work in partnership to retailers and customers who can arm themselves with the facts, to tackle it."

The nature of the illegal tobacco trade varies from country to country but the drivers are very similar. These include regulation that is not balanced, over-regulation, large excise increases causing price differences between countries and ineffective law enforcement measures: Customs is ill-equipped to eliminate smuggling of illegal cigarette smuggling.

Freddy Messanvi further said that BAT as a tobacco manufacturer is an important part of the solution of tobacco smuggling.

"We are an important part of the solution and we invest over $75 million each year globally to fight the illegal tobacco trade industry.

British American Tobacco has dedicated Anti-Illicit Trade teams across the world and in Nigeria that work with government agencies, including police and customs officials, with the aim of bringing criminals who are involved in the illegal tobacco trade to justice. We also support the FCTC Protocol to eliminate Illicit Trade in Tobacco Products, but this treaty will only be effective if it is consistently applied and enforced by joined up governments." Enditem