Illicit Trade: Cigarettes

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July 2024

According to a new study1 commissioned by Japan Tobacco International (JTI), buying illegal tobacco products is becoming increasingly normalized with 43% of adult smokers (surveyed) are comfortable knowingly buying cigarettes that are produced or sold illegally. The study is focused on four countries with high levels of illicit tobacco trade: Canada, France, Philippines, and the United Kingdom.

Five key drivers, fueling the illicit trade, are highlighted in the study report.

– Cost of living crisis pushing a larger number of smokers towards purchasing cheaper illegal products in illegal channels

– Excessive taxation (leading to loss in government revenue): the World Bank estimates that governments globally lose US$40-50 billion annually in excise tax alone

– Rapid technological progress challenging the enforcement: of the smokers surveyed, 14% claim to have recently purchased illegal tobacco via social channels

– Policymakers underestimating the severity of illicit tobacco trade: of the respondents, 50% cite illegal tobacco trade as being a threat to their country (which is close to parity with drugs / narcotics and terrorism as national dangers) and 61% state that the sale of illegal tobacco is not a victimless crime

– Existing enforcement schemes and penalties not being severe enough to deter criminals: The United Nations Office of Drugs and Crime estimates that no more than 2% of global shipping containers are inspected, signaling that the illegal trade is a relatively risk-free enterprise with large financial upsides.

March 2024

South Africa: A new study2, from the University of Cape Town, reveals that illicit (cigarette) trade incidence in South Africa was 58% in 2022 – up from 5% in 2009 and down from its peak at 60% in 2021. Legal cigarette market account for 14.3Bn sticks in 2022 – against 19.4Bn illicit sticks. In 2022 alone, the South African Government lost R15Bn in excise and R3Bn in VAT due to the illicit trade (1% of the governmental revenue).

Two events led to the explosion of illicit trade:

– The five-month ban on tobacco sales in 2020 during Covid

– The reduction of capacity at Revenue Service (responsible for excise tax collection) from 2014 onward.

The market leader, BAT, claims that illicit cigarette sales now accounts for about 70% of the market. Accordingly, BAT South Africa (BATSA) is set to further scale down its supply chain operations. In 2019, BATSA permanently employed around 1,800 people. Since 2020, the Company has been forced to decrease its workforce by more than 30% after losing ~40% of its sales volume to illicit trade.

Feburary 2024

Malaysia: In Q4 2023 Earnings release, BAT stated that illicit trade incidence in Malaysia remained persistently high at 55.6% of the tobacco market in 2023. BAT urges the Government to implement the measures announced in the Budget 2024 as soon as possible to combat the illicit trade and refrain from regulations that would fuel the further growth of the illicit tobacco trade and the development illicit e-vapor trade.

September 2023

Australia: It is reported that the Australian Border Force seized just under a billion illegal cigarettes worth A$1.1Bn in forgone tax over the past two years3 – as the average price of a pack of 25 cigarettes is set to go from A$40 to A$50 within four years.


The World Health Organization (WHO) defines “illicit tobacco trade” as “any practice or conduct prohibited by law and which relates to production, shipment, receipt, possession, distribution, sale or purchase including any practice or conduct intended to facilitate such activity”.

The most common form of illicit tobacco trade for cigarettes are:

– Contraband: genuine cigarettes that have been bought in a low-tax country and which exceed legal border limits or are acquired without taxes for export purposes, to be then illegally re-sold in a market with higher prices

– Counterfeit: cigarettes manufactured without authorization of the rightful owners and with intent to deceive consumers and to avoid paying duty.


  1. ↩︎
  2. Illicit cigarettes account for nearly 60% of the SA market – Moneyweb ↩︎
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