Strategies for NCD Risk Factors(cont...)

Harmonize Tobacco Taxes and Strengthen Anti-Smuggling Measures

Recognizing that smuggling can undermine FCTC implementation, in March, 2010, an FCTC working group (which includes South Asian countries) developed a draft protocol to control illicit tobacco trade (Intergovernmental Negotiating Body 2009).28 Areas the protocol covers are its relationship to other international agreements, such as the UN Convention against Transnational and Organized Crime, the development of an international tracking and tracing system, and requirements for wholesale customer identification and verification.

This protocol is expected to aid the implementation of the FCTC and is currently under consideration by the FCTC’s Conference of Parties. While many countries struggle to control tobacco smuggling, others are more successful. The experience in Spain, for example, demonstrates the effectiveness of focusing on the supply chain.

From 1996 through 2000, Spain increased its resources dedicated to track cigarette smuggling from €4 million to €44 million. Through systematic detection of traffic routes and seizure of containers, fines and penalties on smugglers, as well as strong law enforcement mechanisms, Spain reduced the market share of smuggled cigarettes from 16 percent to 2 percent, and boosted tax revenues from tobacco products from €2,300 million to €5,200 million—a significant return on investment (Joossens and Raw 2008).

Europe and South America present good examples of regional cooperation on tobacco control. The European Commission (EC), based on the Racketeer Influenced and Corrupt Organization Legislation, filed a suit against the tobacco companies in a U.S. court after European courts had found the tobacco industry liable for indirectly participating in smuggling across Europe.

Tobacco companies immediately attempted to settle out of court. They had been negotiating, country by country, a memorandum of understanding that was unenforceable and non-binding, while offering to donate funds for health and other social programs, as they had previously done with several other countries (BAT 2009; Gilmore et al. 2006; Samet et al. 2006).

The EC, acting as a regional entity, negotiated a more stringent agreement on behalf of all its member countries, and dropped the suit only after the tobacco industry accepted it.

This agreement, which includes tracking mechanisms financed by tobacco companies, has served as a model for other regions.In 2003, several countries in South America began harmonizing tobacco product taxes to reduce susceptibility to illicit trade.

This move also made them less vulnerable to ad hoc agreements with the tobacco industry (Iglesias and Nicolau 2006). These same South American countries also created a common database of the various types of warnings on cigarette packages to support the implementation of the FCTC at country level (Mercosur 2003). The rationale for a regional approach to taxation and smuggling is that, unchecked, smuggling will undermine advertising and tax policies designed to reduce consumption.