Reducing illegal tobacco sales by firms key to more revenue

A French politician is fronting for a “painless” solution that could help countries like Kenya earn more by taming the sale of illicit tobacco by manufacturers. PHOTO | FILE

What you need to know:

  • The producers, Christophe Madrolle claims, also sell tobacco in countries that have low taxes.
  • In Kenya, the government has lately been trying to impose tough regulations for manufacturers to deter smokers.

A French politician is fronting what he calls a “painless” solution that could help poor countries like Kenya earn more by taming the sale of illicit tobacco by manufacturers.

In a unique argument published on various portals in France, Christophe Madrolle, the deputy secretary-general of centrist party, Democratic Movement (MoDem), says authorities should go for manufacturers because they are the ones heavily involved in illegal trade of cigarettes.

“The goal of the tobacco manufacturers is to promote low-cost tobacco circulation to undermine public health policies based on strong taxation of tobacco products targeting, in particular, price-sensitive teenagers,” he argues.

“One out of three teenagers who smoke becomes a regular adult smoker. Consequently, the illicit trade in tobacco products allows cigarette makers to find their smokers of tomorrow.”

Mr Madrolle, whose party has traditionally supported the European Union, as opposed to the current rising wave of exiting, argues that African countries could earn at least Sh110 billion that eludes them through this illicit trade.

The European Union on the other hand could earn twice that, meaning that the bloc could help finance development projects on the continent without necessarily burdening recipients with unsustainable debt.

MORAL FUNDING

This, he calls a lasting, painless and moral funding to the needy. So how do manufacturers dodge these taxes?

According to him, they sell products to intermediaries scattered in places like Africa, Asia and Eastern Europe where taxes on cigarettes are relatively low.

But the intermediaries then sell them to high-tax countries meaning that the firms actually earn more by paying less taxes.

The producers, he claims, also sell tobacco in countries that have low taxes.

But they simply exceed the demand there so that the excess can then be sold to countries with higher taxes.

The traditional thinking may be that counterfeits and corrupt border manages contribute more to this loss of revenues.

A World Health Report in 2015 showed that “other enabling factors” such as corruption and weak systems, rather than dodging taxes, facilitated more illicit trade in cigarettes.

ILLICIT CHANNELS

At least 600 billion cigarettes are sold in illicit channels, which is about 15 per cent of what is consumed annually in the world.

But the French politician argues those lag behind the schemes of manufacturers themselves.

In Kenya, where one in 10 people are smokers according to the Ministry of Health, the government has lately been trying to impose tough regulations for manufacturers to deter smokers.

In February, the Court of Appeal dismissed the case filed by British American Tobacco, largest producer of cigarettes smoked in Kenya, seeking to halt some of the regulations.

First applied in September last year, the regulations compel manufacturers to have graphic warnings in packs, disclose ingredients, limiting interaction between manufacturers and public officers like MPs as well as banning the sale of cigarettes as single sticks.

In a bid to counter illicit sales, the regulations also demand that manufacturers publish records of sales and disclose other bits of their business, besides establishment of a tobacco fund.

In 2015, Kenya Revenue Authority launched its Excisable Goods Management System meant to verify products as the move up the supply chain. Kenya is also a signatory to the World Health Organization Framework Convention on Tobacco Control, a treaty meant to address the problem.

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