The World Health Organization estimates that smuggled cigarettes account for more than 10 percent of the 600 billion cigarettes consumed worldwide each year. The U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives reports that illicit trade results in the loss of billions of dollars in tax revenue annually for federal and state governments.
According to the latest survey by the Mackinac Center for Public Policy, excessive excise taxes on tobacco drive illicit trade.
As state and local governments pass additional tobacco product excise taxes to increase revenue, illicit trade is growing:
- Smuggling—such as transporting cigarettes from a low-tax jurisdiction to one where taxes are higher—is increasing;
- Counterfeit cigarettes are imported illegally and sold in the United States; and
- The illegal resale of cheaper cigarettes compromises Youth Tobacco Prevention efforts. Individuals illegally selling cigarettes on street corners out of backpacks likely don’t care to whom they sell.
Goals and Leadership
The RAI illicit trade strategy is led by the Commercial Integrity (CI) Pillar Team, which promotes policies and activities that support a fair marketplace and a level competitive playing field. The CI Pillar Team, which meets monthly, is composed of individuals from public affairs, consumer and trade marketing, sustainability, strategy and planning, tax and operations. The team reports to the Transforming Tobacco Steering Committee and to the RAI Leadership Team on progress around our programs and priorities.
Programs and Priorities
RAI and its operating companies work with law enforcement officials to combat illicit trade, assisting in investigations into alleged illegal operations. We support dedicating increased law enforcement resources and funding to combat this issue.
Our companies engage with diverse stakeholder groups including law enforcement, tax administrators, community groups, neighborhoods, legislators and others to raise awareness of this issue. By convening such groups, the issue of illicit trade is addressed from multiple angles and feedback is solicited. We support legislative efforts that are effective in reducing smuggling.