Report on Smuggling Control in Spain
Report on Smuggling Control in Spain by Luk Joossens, Non-Smokers’ Rights Association and the Smoking and Health Action Foundation, Toronto, Ottawa, Montréal Canada, for the World Health Organization. Undated.
Summary of published paper:
Tobacco smuggling is a critical public health issue. It brings tobacco into markets cheaply, making cigarettes more affordable and thus stimulates consumption. The result is an increase in the burden of ill health caused by its use. According to the tobacco trade report World Tobacco 2002, a major feature of the world cigarette market is the continued growth in smuggling and counterfeit trade, which accounts for at least 8% of the world cigarette consumption. Smuggled tobacco products also pose a threat to public health and to government treasuries, which lose tremendous amounts in revenue through smuggling due to unpaid cigarette taxes.
The tobacco industry typically argues that tobacco smuggling is caused by market forces resulting from price differences between countries, which create an incentive to smuggle cigarettes from “cheaper” countries to “more expensive” ones. The industry has urged governments to solve the problem by reducing taxes, which will also, it says, restore revenue. The facts contradict all these assertions. This paper reveals that the opposite is true: Smuggling is more prevalent in “cheaper” countries and, where taxes have been reduced, such as in Canada, consumption has risen and revenue fallen Spain is the most impressive example to date of how to solve the cigarette smuggling problem.
There are two main reasons why Spain's example of combating smuggling is impressive: 1) The country had a huge smuggling problem, despite low prices, and 2) It effectively reduced smuggling without reducing cigarette prices.
Spain is one of the few countries in the world that has tackled cigarette smuggling successfully. It did not do so by reducing the tobacco tax. Despite Spanish cigarettes being among the cheapest in the European Union, smuggled cigarettes had an estimated market share of 15% in 1995.
According to the Spanish customs authorities, their success was due to reducing the supply of contraband cigarettes coming into the country at “container level,” through intelligence, customs activity and cooperation, and technology.