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Are the tobacco industry's claims about illicit trade credible?

Author

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  • van Walbeek, Corne

    () (School of Economics, University of Cape Town)

  • Shai, Lerato

    (School of Economics, University of Cape Town)

Abstract

Background The tobacco industry claims that illicit cigarette trade in South Africa is high and rising. This is often used as an argument not to increase the tobacco excise tax. Objectives To determine how the industry's estimates of the size of the illicit market have changed over time. Methods Published media articles on illicit trade were obtained from South African Press Cuttings, and published and unpublished articles and statements were sourced from the internet. Results 419 relevant articles and media statements were found. Of these, 80 emphasised the industry's perspective, 40 emanated primarily from the tobacco control community, and 299 reported on action taken against illicit activity. For each for the years between 2006 and early 2011, the Tobacco Institute of Southern Africa reported that South Africa's illicit market share was 20%, increasing to 25% in late 2011 and to 30% in 2012. In a 2012 presentation to Treasury the illicit market share in 2008 was shown as 7.9%, compared to claims in 2008 that the illicit market share was 20%. There was a large spike in reported seizures of illicit cigarettes in 2010 and 2011, but a 60% decrease in 2012. Conclusions The tobacco industry has adjusted previous estimates of the illicit trade share downwards in order to create the impression that illicit trade is high and rising. If previous estimates by the tobacco industry were incorrect by their own admission, the credibility of current estimates should be questioned, especially by government officials.

Suggested Citation

  • van Walbeek, Corne & Shai, Lerato, 2014. "Are the tobacco industry's claims about illicit trade credible?," SALDRU Working Papers 129, Southern Africa Labour and Development Research Unit, University of Cape Town.
  • Handle: RePEc:ldr:wpaper:129
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    More about this item

    Keywords

    Illicit trade; cigarettes; South Africa; industry rhetoric;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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