Illicit tobacco trade in Georgia: prevalence and perceptions

Abstract

BackgroundIn lower-income and middle-income countries, limited research exists on illicit tobacco trade and its responsiveness to taxation. Tobacco taxes are critical in reducing tobacco consumption, thereby improving public health. However, the tobacco industry claims that tax increases will increase illicit tobacco trade. Therefore, research evidence on the size of the illicit cigarette market is needed in Georgia and other low-income and middle-income countries to inform tobacco tax policies.MethodsIn 2017, a household survey using stratified multistage sampling was conducted in Georgia with 2997 smokers, to assess illicit tobacco consumption. Smokers were asked to show available cigarette packs to the surveyors. These were examined for tax stamps and health warnings which allowed for an assessment of illegal cigarette consumption in Georgia.FindingsThe packs shown to surveyors suggest illicit cigarette trade is low (1.5%), although with regional differences, as illicit cigarette packs were present in 6% of the households in Zugdidi. Most illicit cigarettes were purchased at kiosks or informal outlets. This estimate might be conservative, as 28% of respondents did not show any packs to the surveyors.ConclusionsDespite recent tobacco tax increases, illicit cigarette trade in Georgia seems to be negligible. The market is more vulnerable to illicit cigarette trade close to the border with Abkhazia (near Zugdidi). Tighter control or ban of tobacco sales at kiosks and informal outlets may reduce illicit cigarette trade. Further investigation is planned to better understand why a large proportion of survey participants said they had no pack available at home.

Taxing Tobacco in Georgia: Welfare and Distributional Gains of Smoking Cessation

“…2 Filtered cigarettes are the most common type of tobacco product consumed, and only a small percentage of the population consumes unfiltered cigarettes or both (Little et al 2019). 3 Evidence also suggests that smoking frequency (the number of cigarettes smoked daily) tends to be higher for individuals with low educational attainment and those unemployed (Little et al 2019 A major legislative reform on tobacco control was adopted by the Georgian Parliament in May 2017, after unsuccessful attempts in previous years. The main components of the law are summarized on Table 2, and a more detailed description is included in Annex 1.…”

“…Taxes on tobacco products in Georgia were introduced in 1997. However, locally manufactured cigarettes enjoyed substantially lower tax rates, while the fixed specific excise rates allowed the real value of taxes to erode until 2004 (Little et al 2019).…”

“…Georgia was an important producer of tobacco leaves and manufactured cigarettes for the Soviet Union. The tobacco industry collapsed in the early 1990s after independence, leading to the dominance of domestic markets by international brands(Little et al 2019).3 According to a household survey on tobacco consumption patterns conducted in 2017, 87 percent of smokers consumed filtered cigarettes, 9 percent consumed unfiltered cigarettes, and 3 percent consumed both. Only 1 percent preferred other products, including cigars and e-cigarettes.…”

“…It was not designed to be representative of the national population (Little et al 2019). 4 Individuals with less than secondary school education smoked 23 cigarettes per day, and those unemployed smoked 22 cigarettes per day(Little et al 2019).…”

“…For the discussion on another commonly cited argument by the tobacco industry against taxes on tobacco-the potential increase in illicit trade-seeLittle et al 2019. The authors find that provided "the tax administration remains strong and vigilant, policy-makers in Georgia do not have to worry that the planned increases in tobacco excise taxes will result in a massive influx of illicit cigarettes to the market.…”