On 8 November, the Tax and Customs Committee of the Business Association of Georgia conducted a round table where results of latest Empty Pack Survey run by international research company Nilsen were discussed. The Empty Pack Survey covers a comprehensive review of 2023 first quarter results of non-domestic cigarette consumption in Georgia as well as trends and developments for the last few years.
Representatives from business organizations and state authorities participated in the meeting. Daniel Maracineanu, the General Director of the ACTIV organization in Romania was invited to share good practices of fighting against illicit tobacco trade.
According to study results, the non-domestic cigarette consumption in Georgia in 2023 was measured at 6.2% overall. However, in some of the cities the non-domestic incidence reached as high as 76% (in Zugdidi) or 37-25% (in Akhalkalaki and Batumi).
The problem of illicit trade varies depending on the region or country, ranging from counterfeiting, to smuggling and under declaration. However, globally, illicit trade remains a scourge on society and the economy.
GEORGIA TODAY sat down with Artur Rieznikov of Philip Morris to find out more.
What is the global trend of illicit trade globally and what has changed in 2023?
We do not yet have comprehensive data for global illicit trade for 2023, but let me share with you some recent trends from the EU, which will be interesting to the readers in Georgia, for whom the European Commission recommended granting the status of a candidate country.
The 2022 KPMG annual study on illicit cigarette consumption in the EU, UK, Norway, Switzerland, Moldova and Ukraine, reveals that 35.8 billion illicit cigarettes were consumed across the EU alone, causing governments the loss of an estimated €11.3 billion in tax revenue — 8.5% more than in 2021. At the same time, there are countries in the EU like Poland and Romania that are actively driving a decline in the consumption of illicit cigarettes, as evidenced by the data published by KPMG, even reaching their lowest-ever illicit consumption incidence since KPMG began publishing its annual studies.
35.8 billion illicit cigarettes were consumed across the EU alone, causing governments the loss of an estimated €11.3 billion in tax revenue
Poland saw its illicit consumption decline to 1.8 billion cigarettes (4.2% of total consumption was illicit). Just ten years ago, in 2012, the share of illicit cigarettes in Poland was at 13%, with the country recording its highest level of illicit consumption in 2015, when it reached 16.8%. In Romania, contraband and counterfeit cigarettes, as a share of total consumption, declined by 1.5ppt to 6.4% in 2022. The progress in the fight against illicit cigarettes in this country is equally remarkable: In 2012, the share of illicit cigarettes was established at 9.3% of total consumption, reaching then a troubling 16.8% in 2015.
The decreasing consumption of illicit cigarettes in Poland and Romania showcases the impact of effective law enforcement against criminals profiting from illicit trade in countries where alternative tobacco products are available and are more affordable to adult smokers.
What are the key findings of the upgraded report of the Nielsen’s Empty Packs Survey in Georgia (2023)?
According to the latest Empty Pack Survey non-domestic cigarettes continue to be a noticeable part of the total consumption in Georgia reaching 6.2% in 1st quarter of this year. And considering that last year’s non-domestic incidence of 7.5% was the highest over the last decade we would definitely like to see it decreasing further to the levels of 2013-2019 years when it did not exceed half of a percentage point. In this respect it would be worth mentioning that the incidence of non-domestic cigarettes in some of the cities in 2023 was particularly high: thus in Zugdidi it was 76.0%, in Akhalkalaki 37.0% and in Batumi 24.5%
Why it is important to fight against illicit tobacco trade?
Illicit trade is a scourge on society and the economy. It harms consumers by exposing them to unregulated products, deprives governments of tax revenue; moves through channels utilized by criminals for many types of criminal activity; and damages legitimate businesses – including our own.
For us as a company, eliminating illicit trade is particularly important within the context of PMI’s transformation toward a smoke-free future. The availability of untaxed cheap, fake, and unregulated cigarettes on the black market undermines efforts to reduce smoking prevalence and prevent youth from smoking. To deliver a smoke-free future, we know we must defeat illicit trade.
As we advance on our journey toward delivering a smoke-free future, we must increase our efforts to secure both our supply chain and the products we sell
As we advance on our journey toward delivering a smoke-free future, we must increase our efforts to secure both our supply chain and the products we sell. It is an integral part of our work to protect consumers and our brands from smugglers and counterfeiters. We invest heavily in protecting the consumer journey for the millions of adult smokers who don’t quit and choose to switch to smoke-free alternatives, including protecting the legitimate commercialization of our products. Adult smokers, including those who are transitioning to smoke-free alternatives, must not be exposed to counterfeit and contraband products.
This is why to deter illicit tobacco flows, Philip Morris International (PMI) continues to invest significantly in supply chain controls through preventive and protective measures, implements state-of the-art track-and-trace technology, and applies strict due diligence protocols towards all customers and suppliers.
How is the illicit tobacco trade correlated with the efforts to reduce smoking prevalence and prevent youth from smoking?
Let me be clear: youth should not use any nicotine-containing products; nicotine-containing products are addictive and not risk free. All of our positions and our polices are directed to preventing youth from accessing and using nicotine products. As for illicit tobacco, as mentioned previously, when cheap, fake, and unregulated cigarettes are widely available in the market, this undermines efforts to prevent youth from smoking and to reduce smoking prevalence.
In your opinion what is the good practice to combat illicit trade in tobacco products?
Cross-sector, public-private collaboration is essential to keep consumers and brands protected from smugglers and counterfeiters. Illicit trade and criminal economies are a complex global scourge that require multi-parties’ responses and collaboration. PMI stands ready to work with law enforcement agencies, regulators, and policymakers around the world to enact impactful changes to society. At PMI, we collaborate with law enforcement agencies and other organizations all over the world to root out and shut down illegal activities, including counterfeiting and smuggling operations. On several occasions, for example, PMI has been able to share relevant information with law enforcement agencies about seized tobacco products, including tracing analysis, in order to enable authorities to act against criminals involved in supply chain disruptions.
In addition to our rigorous measures to detect and deter illicit trade, including our investment in advanced technologies that help us secure our supply chain and protect our products, we have an unwavering commitment to assisting law enforcement authorities to inspect and authenticate seized products, share intelligence on emerging routes and trends shaping the black market, and train officials on product-authentication tools and security features.
