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Illicit trade in developing countries

The impact of taxation and price policy measures on illicit cigarette trade in selected low and middle income countries

The ETCP was chosen by the Cancer Research UK (CRUK) to lead a 30 month project starting in November 2016, to investigate the relationship between tobacco tax increases and the illicit trade in cigarettes in four low- and middle-income countries (LMICs).

The aims of this study are two-fold. The first is to contribute to existing knowledge regarding excise tobacco taxes and illicit tobacco trade in LMICs and the second is to develop in-country capacity in LMICs around tobacco control, by establishing a close working relationship between ETCP and the in-country teams.

The tobacco industry lobbies extensively against tax increases arguing that these drive up illicit trade in tobacco. This makes providing empirical evidence on actual market responses to higher taxes imperative. If tax increases do not substantially change the magnitude and the nature of illicit tobacco trade, such taxes are an effective tool to lower smoking prevalence by lowering demand through higher prices leading to a major improvement in public health.

We will identify four countries in which a tax increase is anticipated between 2017 and 2018 and work closely with in-country teams to capture data on the size of illicit cigarette market pre and post a tax increase. The methodology may vary by country but may include examining cigarette packs (discarded or from retail outlets/smokers), surveying tobacco users for self-reported pack features, comparing tax-paid sales with consumption estimated from surveys (gap analysis), or econometric modelling of cigarette demand through regression analysis. The analysis of the pre and post tax increase data will reveal the extent to which the tax increase has affected illicit trade.

Evidence from this project will be important for guiding the tax decisions of government in LMICs and the results will be disseminated through media briefings, workshops, policy briefs and conferences presentations. In addition, we will leverage our FCTC Secretariat Knowledge Hub for further dissemination. The project outputs will include 12 datasets (3 waves of data collection in each country) and five papers submitted to academic journals (one per country and one summary paper).

The project's team include Hana Ross, Nicole Vellios, Zunda Chisha and Megan Little. The project facilitates the ETCP's engagement with policy makers and researchers in LMICs.