UK: Plain packaging ''Will Lead to Big Rise in Illicit Tobacco'' ($)

Source from:  Times Of London (uk)  01/24/2013

The Government risks inflaming the illicit tobacco trade if ministers enforce non-branded cigarette packets, a report warns.

The introduction of plain tobacco packaging, which is being considered following a public consultation, may stimulate counterfeiting, reduce consumers' ability to spot illicit products and reduce the perception of differences between genuine and fake products, a review by academics for Transcrime has found.

Officials at the Department of Health are meeting the big tobacco manufacturers to discuss the impact on the industry if it follows Australia and introduces plain packs.

HMRC admitted this month at an inquiry held by a cross-party group of MPs into the illicit trade that it did not know what impact plain packs would have.

Andy Leggett, deputy director of alcohol, tobacco and gambling taxes, said it was "difficult to quantify" and that HMRC was yet to receive any evidence from Australia on the impact there.

Today's report by Transcrime, funded by Philip Morris International, the world's biggest tobacco company, said the Government's anti-illicit tobacco strategy had been the most important factor in reducing the supply since 2000, but said the illegal market remained above the EU average.

High tobacco prices and taxes in Britain mean "high profit with relatively low risks" for individual bootleggers and organised groups who sell in places such as pubs, flats, newsagents and flea markets, typically to friends, relatives or colleagues, and who often deal in other goods such as DVDs and clothes.

Legitimate shops selling illegal products has risen in the last year, the report continued.

Tobacco smuggling gangs comprising Britons gather in small criminal networks and in some cases Eastern Europeans participate. The number of members varies from two to ten people on average and they typically share expertise in transport and trade.

Smugglers have created "contacts for mass importation of illicit tobacco" and counterfeiters manufacture in "fully equipped" cigarette factories in the UK.

Seizures of illegal tobacco products, of which hand rolling tobacco has soared, are a "standard cost for illicit traders".

"Law enforcement officers in the UK consider that the problem of illegal tobacco should receive more resources, even though the strategy implemented has had significant effects on the illegal tobacco market," the report said.

The conviction rate for illicit tobacco, although high compared with other European countries, has halved over the past two years, suggesting "law enforcement in the UK concerning the conviction of illicit tobacco traders is a weak point in the general law enforcement".

The academics also warned that the illicit trade was largely "under researched".

The report warned that Britain's consumerist culture, socio-economic inequalities and the global financial crisis left Britain in a "critical situation".

The report warned those social forces that triggered the riots in August 2011 may "propagate illegal behaviours" contributing to the expansion of the illicit tobacco market.

Despite the reduction in household income over recent years, tobacco sales have been less affected, indicating that smokers are unlikely to quit smoking if the cost rises. "These attitudes may contribute to the expansion of the illicit trade", the report said.

Smokers have been downtrading to less expensive cigarettes and hand rolling tobacco has risen during the recession.

"Remarkably hand rolling tobacco is a sector where the illicit market share is still at approximately half of the total consumption," the report said.

Illicit smoking can be linked to deprived conditions. The North East has the biggest illicit market and the region where smoking is most prevalent. The main sources of illicit cigarettes to Britain are Poland, Spain, Romania and Russia.

The report also said that because drug consumption in the UK is the highest in Europe, the illicit distribution seemed very active and "may provide opportunities for a variety of illicit traffics, from drugs to illicit tobacco." Enditem