NOVEL RESEARCH: Cigarette contraband fell two percent in January

The black market for cigarettes fell 2% in January compared to November last year, from 15% to 13%, according to the latest data provided by "Novel Research".

Two years ago, in January 2010, contraband reached an all time high of 36.2%, as a result of the massive hike of cigarette excises. Illegal cigarette trade later entered a downward trend, with the exception of the months of July and November of 2011.

The areas in the Eastern region are seeing a contraction in the illicit cigarette trade (significantly more so in the South East), amid the decrease in the traffic of cigarettes with Moldavian stamps.

The West is the only region which is seeing a significant growth of the illicit trade, amid the increase in the traffic of products with Serbian stamps.

The volume of tobacco smuggling on the Serbian border has almost doubled, according to data published by "Novel" in January, rising from 12.9%, in November, to 24.1% - in the first month of 2012. Illicit trade on the Ukrainian border has also increased to 29.1% of the total black market, from 27.1% - in November 2011.

Romanian cigarette makers consider that a good measure needed to improve the legislative framework concerning contraband/evasion would be to grant clear competences to the local police and to the gendarmerie, allowing them to punish the illegal sale of cigarettes in markets, fairs or in the street.

Another situation which needs to be clarified is the one tied to acknowledged and intention, market players say. At the moment, if the person illegally transporting the cigarettes says it is not aware of the origin of the merchandise, they are not prosecuted and the vehicle is not impounded, because it is considered that there was no intent to commit contraband.

In 2011, the three largest companies in the industry paid 2.75 billion Euros to the state budget, representing excises and VAT.

Gilda Lazăr, JTI:

"The black market fell significantly because the authorities have acted in a concerted manner. After the powerful signal given by the Romanian Supreme Defense Council, which made the illegal cigarette trade a priority, the legislation changed, a common order of the ministers of Internal Affairs and of Finance was issued, a working group was created and a strategic plan to fight the illegal cigarette trade was devised. It also bears mentioning that due to the efforts of the authorities in the Republic of Moldova, the weight of contraband involving cigarettes bearing Moldovan stamps decreased. Unfortunately, we are currently witnessing an increase in the contraband involving cigarettes coming in from Serbia. In order for the black market to continue to drop in the future, legislation needs to continue to improve, and the schedule for the raising of the excises published in the Fiscal Code needs to be adhered to".

Adrian Popa, BAT:

"The reduction of the black market implicitly results in the increase of the earnings of the state budget, through the taxes paid by the companies in the tobacco industry. For example, according to the National Customs Authority, in January 2012, earnings from the cigarette excise increased 42% compared to January 2011. Just one percent recouped by the legal market translated into an increase of the tax receipts of about 30 million Euros, and if the illicit trade were to be cut to zero, the state budget would earn approximately 400 million Euros more. In the future, the institutions of the state mustn't let their guard down, especially since the smuggling rings show extreme flexibility in their actions. For instance, lately we are seeing a worrisome recovery of counterfeit cigarettes. The authorities have also notified a new situation: the illegal introduction of cigarettes - the so-called "illicit whites", less known brands - on the territory of the community through the Greek ports, which then go through Romania towards the countries in the West".

Andrei Vasilescu, Philip Morris:

"The fact that the year has begun with a drop in the cigarette contraband is a reason to rejoice. Cigarette makers praise the signing of the National Strategic Plan to fight the illegal cigarette trade between 2012 and 2014 and they continue to support an integrated approach. The companies in the tobacco industry will continue to avail to the authorities the expertise they have acquired on other markets and will continue to cooperate with the competent institutions, in order to fight smuggling. In the future, what is necessary is the improvement of the unified legislative framework which would regulate contraband and tax evasion. The implementation of the quantitative criteria when it comes to qualifying the tax evasion/contraband offense, both on Romania's territory, as well as at the border crossing points, would result in a simplification of the procedures".