NOVEL RESEARCH: CONTRABAND LEVEL REMAINS STABLE AT 13.4% The state loses 400 million Euros a year from the illicit tobacco trade

• The level of contraband in Bucharest has seen an alarming increase

• The traffic with Moldovan brands has seen a significant decrease

The state loses 400 million Euros a year from the illegal sale of cigarettes, as in March, the level of contraband has remained at 13.4% of the total market volume, according to Adrian Popa, Head of Corporate & Regulatory Affairs at "British American Tobacco" (BAT) Romania. The losses come from the unearned revenues and taxes pertaining to the tobacco products sold illegally.

The official representative of the BAT thinks that the drop of the black market should have been bigger: "If we are to compare March 2011, when the black market stood at 14.7%, and March 2012, when it reached 13.4%, we feel that the drop should have been bigger, given the priorities announced by the new government towards fighting tax evasion and illicit trade".

He expressed concern about the appearance of the so-called "< illicit whites >- cheap filter cigarettes" - in the European area, which use the Greek ports as the entry gateway and transit through Bulgaria and Romania, in order to reach Spain or Great Britain: "Romania is both a destination, and a transit area, located at the Eastern border of the EU, which generates additional obligations towards fighting cross-border criminality, illicit trade and organized crime".

Gilda Lazăr, Head of Corporate Affairs & Communications at "Japan Tobacco International" (JTI) Romania and Moldova, shows the fact that for the first time since 2010, cigarettes bearing Moldovan stamps no longer have the largest weight on the black market, as there has been a significant reduction in the trafficking of local Moldovan brands: "It is a positive news and a premise for stimulating the partnership with the Moldovan authorities further".

Gilda Lazăr considers that the drop of the contraband level from over 36% to about 13% in the last two years, is owed to the strategic approach concerning the phenomenon, the concerted efforts of the authorities, the improvement and the simplification of the legislative environment, as well as the tight cooperation between the institutions of the state and the tobacco industry.

"In order for the black market to continue to drop, there is a need to maintain the fiscal predictability and stability on a domestic level, and the improvement and harmonization of the legislative framework, as well as the intensification of the cooperation between the institutions of the state", considers Sorana Mantho, Head of Corporate Affairs at "Philip Morris" Romania and Bulgaria.

He said: "The legislative initiatives which support the efforts for improving the activity of the authorities involved in the fight against contraband could be more effective towards reducing the illicit trade than initiatives such as raising the contribution to the healthcare fund, the so-called < vice-tax >, introduced in December 2011, in the draft of the healthcare law".

The level of the tobacco contraband level has remained relatively constant in the last months, reaching 13.4% of the total domestic tobacco market. The figures have remained unchanged in all the regions severely affected by this phenomenon: 31% in the West, 22.2% in the North East and 20.8% in the North West. On the other hand, an "alarming" 5.8% increase has been seen in Bucharest in March 2012, compared to January 2012, up to 13.5%, according to the latest report by "Novel Research", which states: "A good piece of news for the South-West region is 5.1% drop, compared to January 2012, by 8%."

Marian Marcu, the head of "Novel Research" said that when it comes to the weight of the various countries of origin of the contraband cigarettes, according to the fiscal stamps applied on the packs, this places Ukraine in the top spot, with 27%, followed by Moldova, with 26.2%, Serbia, with 20.8% and duty-free, with 18.7%".

In March 2012, The Center for the Investigation of Criminality (Transcrime) has published an analysis which proves the direct connection between the hikes in the tobacco taxes and the rise in the cross-border criminality related to it. The study in question shows the need for cooperation between the authorities tasked with fighting contraband, as well as of the harmonization of the legislative environment, both qualitatively and geographically, between the countries and the regions which are the most affected by this phenomenon.

The quoted sources estimate that the implementation of the volume criterion for charging criminals with tax evasion, both within the country, as well as at the border crossing points, would simplify procedures: "There is also a need for the clarification of the situation on the domestic border with Hungary and Bulgaria, which still have border control points, as well as the creation of clear verification mechanisms."