An analysis of purchase price of legal and illicit cigarettes in urban retail environments in 14 low- and middle-income countries

Illicit cigarette market in Georgia: potential impacts on smoking prevalence and tax revenues

OBJECTIVES

This study aims to examine the impact of taxation measures implemented between 2017 and 2019 on the illicit cigarette market in Georgia and to assess the potential effects of its full elimination on smoking rates and tax revenues.

STUDY DESIGN

This was a cross-sectional and observational study.

METHODS

The study uses the gap analysis method to estimate the size of the illicit market by comparing self-reported cigarette consumption with tax-paid cigarette sales. Potential changes in cigarette consumption are calculated using estimates of price demand elasticity and the price difference between licit and illicit cigarettes. The applicable excise tax is then applied to the estimated change in licit cigarette consumption to determine the potential change in tax revenues.

RESULTS

In 2020, illicit cigarettes accounted for 6.4% of the market, which decreased to 0.6% in 2021. Eliminating the illicit cigarette market could potentially reduce the number of smokers by 0.5% in 2020 and 0.1% in 2021. It could also lead to a 2.8% increase in excise tax revenues in 2020 and a 0.2% increase in 2021. The study highlights a notable shift in consumer behavior since 2019 toward smoking roll-your-own (RYO) cigarettes.

CONCLUSIONS

Tax increases did not have a significant impact on the size of the illicit market in Georgia. The shift in consumer preference toward RYO cigarettes may explain why the illicit cigarette market did not expand after the tax hikes. However, this shift diminishes the effectiveness of taxation policies in reducing smoking rates and leads to a decline in excise tax collection.

Response of legal and illegal cigarette prices to a tax increase in Ethiopia

BACKGROUND

In 2020, Ethiopia passed a landmark tax proclamation implementing an evidence-based mixed excise system aimed at curbing tobacco use. This study evaluates the impact of the tax increase of more than 600% on both legal and illegal cigarette prices in order to gauge the impact of the tax reform in the presence of a sizeable illicit cigarette market.

METHODS

Data on 1774 cigarette prices were obtained from retailers during Empty Cigarette Pack Surveys in the capital and major regional cities conducted in 2018 and 2022. Packs were categorised as 'legal' or 'illicit' using criteria from the tobacco control directives. Descriptive and regression analyses were used to study the cigarette price changes during the period of 2018-2022, capturing the impact of the 2020 tax increase.

RESULT

Prices of both legal and illegal cigarettes increased in response to the tax increase. In 2018, the stick prices ranged from ETB0.88 (Ethiopian birr) to ETB5.00 for legal cigarettes while they ranged from ETB0.75 to ETB3.25 for illegal ones. In 2022, a legal stick sold for ETB01.50-ETB2.73 and an illegal stick for ETB1.92-ETB8.00. The average real price of legal and illegal brands increased by 18% and 37%, respectively. The multivariate analysis confirms that prices of illicit cigarettes grew faster compared with the legal ones. By 2022, illicit brands were on average more expensive compared with their legal counterparts. This result is statistically significant at p<0.01.

CONCLUSION

The prices of both legal and illegal cigarettes increased following the 2020 tax increase, with the average real cigarette price increasing by 24%. As a result, the tax increase likely had a positive impact on public health despite a sizeable illicit cigarette market.

The first day of smoking abstinence is more challenging for women than men: A meta-analysis and meta-regression across 12 low- and middle-income countries

BACKGROUND

Maintained abstinence during the first 24 h of a quit attempt is a critical predictor of long-term smoking cessation. Little is known about sex differences in the very early abstinence period, particularly in the context of low- and middle-income countries (LMICs) with varying anti-smoking policies and female smoking prevalences. We examined female sex effects on one-day relapse in a cross-national sample from 12 LMICs.

METHODS

Data from the Global Adult Tobacco Survey (2008-2012) included nationally representative samples from 12 LMICs restricted to smokers with ≥ 1 quit attempt in the past 12 months (n = 16,576). We ran adjusted logistic regression models for female sex effects on one-day relapse, adjusting for nine individual-level demographics (e.g., age, education, age at smoking initiation) and smoking cessation variables (e.g., exposure to health warnings, receipt of counseling). We then conducted a meta-analysis adjusted for national-level and policy measures through meta-regression (e.g., cigarette consumption per capita, percent of cigarette box covered with warning labels).

RESULTS

One-day relapse prevalence varied across countries (2.7-13.6%). The odds of one-day relapse were significantly higher for women than for men in six countries (adjusted for nine individual-level sociodemographic variables), and there were no significant sex differences in the remaining six countries. Result remained significant after meta-regressions for national-level tobacco consumption and policy measures. Sensitivity analyses showed that the odds of one-day relapse for women remained significant when excluding countries with both higher and lower relative rates of female smoking. Larger warning labels on cigarette packs were associated with reduced odds of one-day relapse among women.

CONCLUSION

The first day of a quit attempt is more challenging for women than men in LMICs. Tailored interventions incorporating national policies, in addition to counseling and pharmacotherapy, could play an essential role in supporting women during the initial abstinence phase of smoking cessation in LMICs.

Illicit trade in tobacco products: recent trends and coming challenges

BACKGROUND

Illicit trade in tobacco products is a menace to the goal of eliminating tobacco consumption. Although tax policy is very effective in reducing consumption, illicit trade can reduce (though not eliminate) its effectiveness.

METHODS

This article discusses the recent evolution of illicit trade and the context in which it occurred; the new methods that have been developed to measure it and, finally, the challenges in the next phase in the control of illicit trade.

RESULTS

There has been a remarkable stability in the penetration of cigarette illicit trade in the past decade. Such a stability, however, occurred in a world of shrinking tobacco consumption, implying a decreasing absolute illicit trade. Most countries have progressed in increasing tobacco taxes and changing tax structures. Prices of illicit cigarettes follow legal cigarette prices. Concomitantly, many new studies, independent from the tobacco industry, have been conducted allowing for better understanding of the illicit trade and providing inputs to its solution. The entry into force of the WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products provides both a global and a national policy framework to further curb illicit trade. Instruments such as track-and-trace systems must be promoted and adopted to maximise reductions in illicit trade.

CONCLUSIONS

Global efforts to curb the illicit trade in tobacco products are gaining momentum and progress has been made in many parts of the world. The next decade can witness a decisive decrease in tobacco consumption, both licit and illicit, if countries further engage in international collaboration.

New evidence of illicit cigarette consumption and government revenue loss in Indonesia

INTRODUCTION

Illicit cigarettes because of their affordability could increase smoking prevalence, especially among young people. They also cause a large revenue loss for the government. This study aims to estimate illicit cigarette consumption and government revenue loss in Indonesia, a country with a very high smoking prevalence, especially among males.

METHODS

We estimated illicit cigarette trade in terms of volume and revenue loss. Illicit trade was estimated as the discrepancy between legal cigarette sales and domestic consumption recorded by national representative surveys. Data sources included Basic Health Research Survey, Global Adult Tobacco Survey, National Socioeconomic Survey, and data from Ministry of Finance.

RESULTS

We found that illicit cigarette consumption fluctuated from 19 billion sticks in 2007 to 14 billion sticks in 2013, and sharply increased to 59 billion sticks in 2018. Relative to cigarette consumption, illicit cigarettes were the lowest at 5% in 2013 and highest at 19% of consumption in 2018 (assuming 0% underreporting). The estimated government revenue loss ranged from IDR 24.2 to 42.0 trillion (US$ 1668 to 2897 million), which corresponds to 15.8% to 27.5% of cigarette excise revenue in 2018.

CONCLUSIONS

In Indonesia, illicit cigarette consumption was found to be high and increasing, which contributed to a large government revenue loss (almost onethird of tobacco excise tax revenue). To reduce illegal cigarette production and smuggling, the government should increase resources to enforce the regulation on the excise tax system including stronger penalties, especially related to illicit cigarette production.

Potential impact of eliminating illicit trade in cigarettes: a demand-side perspective

BACKGROUND

The Protocol to Eliminate Illicit Trade in Tobacco Products (the Protocol) entered into force in September 2018, and commits Parties to implement a package of measures to combat this global problem. The aim of this study is to assess the potential impact of eliminating illicit cigarettes on consumption, use and tax revenues.

METHODS

We identified 36 countries where an independent (non-industry sponsored) study of the illicit cigarette market was available. We developed a conceptual framework for describing how the elimination of illicit cigarettes might impact on demand (consumption and use) and applied this framework to our sample of countries to assess the impact of eliminating illicit cigarettes across different settings.

FINDINGS

Illicit cigarettes account on average for 11.2% of the market in these 36 countries. The elimination of illicit cigarettes would reduce total cigarette consumption by 1.9% across these countries. The decrease in 'group A' countries-where illicit cigarettes are >15% of the market-would average 4.1%. The smoking rate would decrease by 1.0% in relative terms including by 2.2% in group A countries. Tax revenues from the legal sale of cigarettes would increase by 11.2% including by 25.1% in group A countries.

CONCLUSIONS

The illicit cigarette market reflects a complex interplay between supply and demand, with an array of different country conditions. Regardless of the situation, our study highlights the contribution that the elimination of illicit trade can make to tobacco control through demand reduction while at the same time generating significant tax revenues.

Estimating illicit cigarette consumption using a tax-gap approach, India

Objective

To estimate the magnitude of illicit cigarette consumption in India using a tax-gap approach.

Methods

In the tax-gap analysis, illicit cigarette consumption in India was defined as the difference between total and legal consumption. Data on total cigarette consumption came from two national Global Adult Tobacco Surveys carried out from 2009 to 2010 and from 2016 to 2017. Legal consumption was derived from Government of India data on domestic cigarette production and trade.

Findings

Estimated total cigarette consumption was 104.8 billion sticks in 2009 to 2010 and 94.2 billion sticks in 2016 to 2017, a decrease of 10.6 billion sticks, or of 10%, over the time period. Legal cigarette consumption fell from 99.4 to 88.5 billion sticks over the same period, a drop of 11%. Estimated illicit cigarette consumption was, therefore, 5.4 billion sticks in 2009 to 2010 and 5.6 billion sticks in 2016 to 2017, and accounted for 5.1% and 6.0% of the market in these periods, respectively. Consequently, only about 1 in 20 cigarettes consumed in India was illicit. Between 2016 and 2017, the estimated equivalent retail sales value of illicit cigarettes was 49 billion Indian rupees (753 million United States dollars, US$) and the estimated tax revenue foregone was 25 billion Indian rupees (US$ 390 million).

Conclusion

Illicit cigarette consumption is relatively modest in India by global standards. Nonetheless, India should strengthen its capacity to control the illicit tobacco market as part of a comprehensive tobacco control strategy, while also continuing to implement traditional demand reduction measures, such as tobacco taxation.

Estimating the Magnitude of Illicit Cigarette Trade in Bangladesh: Protocol for a Mixed-Methods Study

The illicit tobacco trade undermines the effectiveness of tobacco tax policies; increases the availability of cheap cigarettes, which, in turn, increases tobacco use and tobacco related deaths; and causes huge revenue losses to governments. There is limited evidence on the extent of illicit tobacco trade particularly cigarettes in Bangladesh. The paper presents the protocol for a mixed-methods study to estimate the extent of illicit cigarette trade in Bangladesh. The study will address three research questions: (a) What proportion of cigarettes sold as retail are illicit? (b) What are the common types of tax avoidance and tax evasion? (c) Can pack examination from the trash recycle market be considered as a new method to assess illicit trade in comparison to that from retailers and streets? Following an observational research method, data will be collected utilizing empty cigarette packs from three sources: (a) retailers; (b) streets; and (c) trash recycle market. In addition, a structured questionnaire will be used to collect information from retailers selling cigarettes. We will select post codes as Primary Sampling Unit (PSU) using a multi-stage random sampling technique. We will randomly select eight districts from eight divisions stratified by those with land border and non-land border; and within each district, we will randomly select ten postcodes, stratified by rural (five) and urban (five) PSU to ensure maximum geographical variation, leading to a total of eighty post codes from eight districts. The analysis will report the proportions of packs that do not comply with the study definition of illicit. Independent estimates of illicit tobacco are rare in low- and middle-income countries such as Bangladesh. Findings will inform efforts by revenue authorities and others to address the effects of illicit trade and counter tobacco industry claims.

An analysis of purchase price of legal and illicit cigarettes in urban retail environments in 14 low- and middle-income countries

BACKGROUND/AIMS

To estimate and compare price differences between legal and illicit cigarettes in 14 low- and middle-income countries (LMIC).

DESIGN

A cross-sectional census of all packs available on the market was purchased.

SETTING

Cigarette packs were purchased in formal retail settings in three major cities in each of 14 LMIC: Bangladesh, Brazil, China, Egypt, India, Indonesia, Mexico, Pakistan, the Philippines, Russia, Thailand, Turkey, Ukraine and Vietnam.

PARTICIPANTS

A total of 3240 packs were purchased (range = 58 packs in Egypt to 505 in Russia). Packs were categorized as 'legal' or 'illicit' based on the presence of a health warning label from the country of purchase and existence of a tax stamp; 2468 legal and 772 illicit packs were in the analysis.

MEASUREMENTS

Descriptive statistics stratified by country, city and neighborhood socio-economic status were used to explore the association between price and legal status of cigarettes.

FINDINGS

The number of illicit cigarettes in the sample setting was small (n < 5) in five countries (Brazil, Egypt, Indonesia, Mexico, Russia) and excluded from analysis. In the remaining nine countries, the median purchase price of legal cigarettes ranged from US$0.32 in Pakistan (n = 72) to US$3.24 in Turkey (n = 242); median purchase price of illicit cigarettes ranged from US$0.80 in Ukraine (n = 14) to US$3.08 in India (n = 41). The difference in median price between legal and illicit packs as a percentage of the price of legal packs ranged from 32% in Philippines to 455% in Bangladesh. Median purchase price of illicit cigarette packs was higher than that of legal cigarette packs in six countries (Bangladesh, India, Pakistan, Philippines, Thailand, Vietnam). Median purchase price of illicit packs was lower than that of legal packs in Turkey, Ukraine and China.

CONCLUSIONS

The median purchase price of illicit cigarettes is higher than that of legal cigarette packs in Bangladesh, India, Pakistan, Philippines, Thailand, and Vietnam, Brazil, Egypt, Indonesia, Mexico, Russia appear to have few or no illicit cigarettes for purchase from formal, urban retailers.