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Tobacco firms have hand in cigarette smuggling: WHO

Helsinki, Aug. 6 (Reuters): The WHO said today there was compelling evidence tobacco firms played a compliant role in global cigarette smuggling and that governments must hold them accountable.

In a new report focusing on the trade in Iran and Iraq, the WHO estimates one-third of internationally exported cigarettes are lost to smuggling, a $25-30 billion tax loss to governments.

“Cigarette companies often blame organised crime for the massive amount of cigarette smuggling,” said the report, released at the World Conference on Tobacco or Health in Helsinki. “But much of the... smuggling... has occurred with the knowledge of the cigarette companies and would not occur without (their) compliance,” it added.

The WHO said smuggling allows multinational tobacco firms to sidestep trade restrictions and embargoes while fuelling consumption and pressuring governments to cut taxes. It also gives them entry to closed markets because it squeezes a state monopoly and forces the government to allow imports. This is what the industry did in Iran where the market opened last year, the WHO said. However, major European tobacco companies, which include British American Tobacco Plc, Imperial Tobacco Group Plc and Gallaher Group Plc, deny the claims and argue that smuggling actually harms them as many smuggled cigarettes are counterfeit.

“A lot of smuggled cigarettes are counterfeit which does nobody any good except the criminals,” said a spokesman at one of the European tobacco companies.

The report said smugglers are often behind the “disappearance” of containers as they enter a third-party country that is neither the cargo’s origin or destination. A container of 10 million cigarettes can be bought for $200,000 but can be worth up to 10 times that amount when taxes are included, it said. The WHO’s accusations are based on industry documents made available through various lawsuits against tobacco firms.

The report said that the way to slash smuggling is to control the supply of cigarettes rather than lower taxes.

WHO recommended cigarette firms be forced to mark packages to identify who made them, where and when. They should also show the chain of wholesaler, exporter, distributor and end market. “It should be their responsibility to prove that their cigarettes have reached the intended legitimate end markets,” it added.

The cigarette companies point out that they invest heavily on distribution in countries where they trade, so it is more profitable for them to sell cigarettes through legal channels.

In Britain, the department of trade and industry is still to publish the results of its enquiry, which started in October 2000, into allegations of cigarette smuggling by BAT.

Some 4-5 million people die each year from smoking, the WHO estimates, and that will rise to 10-11 million by 2030. But some economically vulnerable countries lack the political will to fight the problem, partly because they depend on money from big tobacco.

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