Report Puts Cost of Illicit Cigarettes at $1.2M

Hundreds of millions of illegal cigarettes consumed in Asia last year were manufactured in Cambodia, which also lost an estimated $1.2 million in revenue from untaxed cigarettes smuggled into the country during that time, according to a report released earlier this month.

The report was compiled by the International Tax and Investment Center and Oxford Economics and funded by tobacco giant Philip Morris International. They surveyed 14 Asian countries and identified Cambodia as a “significant origin market for illicit cigarettes,” most of which are manufactured in the country before being smuggled into Vietnam and Thailand, among other countries.

“Outflows of domestic duty-paid cigarettes to the other 13 markets are relatively high as the price of a pack of cigarettes remains relatively low compared with neighboring markets,” the report says.

Of the 21.9 billion illegal cigarettes consumed in Vietnam last year, 307 million originated in Cambodia, the report finds. Similarly, 84 million of the total 900 million illegal cigarettes consumed in Thailand in 2013 came from Cambodia.

The report also finds that of the countries studied—10 Southeast Asian nations, as well as Australia, Pakistan, Taiwan and Hong Kong—the average price of cigarettes was lowest in Cambodia, at $0.30 for a pack of 20. The next cheapest cigarettes, averaging $0.60 per pack, are found in the Philippines and Burma.

Finally, the report estimates that Cambodia lost $1.2 million in tax revenue from the 400 million cigarettes that were smuggled into the country in 2013. This smuggled tobacco accounted for nearly 5 percent of the total 8.2 billion cigarettes consumed last year.

Joe Oliver, a spokesman for Philip Morris, said via email this week that it is in the interest of everyone in the cigarette industry to eradicate the trade in illicit tobacco, as it affects the entire supply chain.

“It costs governments billions of dollars in lost tax revenue which could otherwise be pumped back into the economy…. It puts money into the hands of organized criminals,” Mr. Oliver said.

“Plus it affects the livelihoods of all those involved in the legitimate tobacco industry,” he added.

Officials at the Commerce Ministry and the Interior Ministry’s economic police department declined to comment Thursday.

In 2012, World Health Organization officials told representatives of the Finance Ministry that Cambodia imposed a tax on tobacco equal to 5.3 percent of the consumer price, the lowest in the world, resulting in cigarettes that cost less than a tenth of what they would in Europe. It also noted that countries with high tobacco taxes had low rates of smuggling.

(Additional reporting by Khy Sovuthy)

mueller@cambodiadaily.com

Clarification: This article has been revised to more accurately reflect the comments from Philip Morris spokesman Joe Oliver. 

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