Int'l center ties cigarette smuggling to terrorism

MANILA, Philippines - Cigarette smuggling has now become a major security concern for many countries because terrorist networks such as the Taliban and Al Qaeda are turning to this illicit trade to increasingly finance their criminal activities, according to a study done by a global non-profit tax research foundation. 

Citing findings by the US Department of Justice Bureau of Alcohol, Firearms and Tobacco (ATF), the International Tax and Investment Center (ITIC) reported that “organized criminal groups, including those with ties to terrorist organizations, are engaged in illegal trafficking of alcohol and tobacco products, including counterfeit tobacco products.”

The center, which serves as a clearinghouse on best practices for tax and investment policy information worldwide, also noted that the crackdown on the banking system after the Sept. 11 terror attacks on US soil, which has made money laundering difficult, have led terrorists and other criminals to the illegal trade of cigarettes to generate funds and move money across borders.

“Research demonstrates that illicit trade [on tobacco products] has become a major security challenge in different environments around the world and is increasingly used to fund terrorism,” the ITIC said in its 39-page report on cigarette smuggling.

The ITIC study disclosed that terrorist organizations and other organized crime groups are exploiting the illicit trade in tobacco products because the highly lucrative activity is relatively low-risk compared to other heavily penalized crimes like drug trafficking and human smuggling.

It also pointed out that cigarettes - being highly taxed, easy to transport and with a lucrative risk-to-reward ratio - are among the most illegally trafficked goods in the world, with “people involved in the smuggling of tobacco products also involved in the trafficking of drugs, people, alcohol, diamonds, timber and antiquities.”

The report titled “The Illicit Trade in Tobacco Products and How to Tackle It” was authored by tax and customs expert Elizabeth Allen, who has over 35 years of management, operational and policy experience in the United Kingdom’s revenue and customs agencies.

The study found that an “unbalanced tax policy that calls for radical tax increases for tobacco products triggers cigarette smuggling” and advised governments to “balance their approach in the setting of excise tax rates with the aim of optimizing tax revenues in the long term and avoiding the development of an illicit market.” 

Even the World Bank, the ITIC pointed out, has advised governments against excessive, yet counterproductive tax rate hikes in tobacco products.

Various stakeholders have recently raised concerns about the marked increase in trade of illicit cigarettes as a result of the implementation of the Finance department-backed House Bill (HB) 5727.

HB 57727 seeks to impose a unitary tax rate of P30/pack on all tobacco products within three years from implementation which will result to more than a 1000% increase on low-priced cigarettes. Thus, triggering influx in the country of smuggled and counterfeit cigarettes.