Archives For tobacco

Cigarette Smuggling in Logs

September 23, 2017 — 1 Comment
Advertisements

cigarettes

The Zimbabwe Herald suggests that Zimbabwe could be losing millions of dollars in unpaid taxes due to rampant smuggling of cigarettes into South Africa, investigations by this paper have revealed.Between 2014 and 2015, local customs officials seized nearly 2 500 cartons worth around $500 000 in taxes, according to the Zimbabwe Revenue Authority.

Figures from the South African side are staggering, showing a wide discrepancy in the value of confiscated contraband between the two neighbouring southern African countries.

The South African Revenue Service told The Herald Business that it had seized R87 million (US$6,2 million) worth of Zimbabwean cigarettes since 2014, or 95 million sticks.

This will likely be worth millions of dollars in evaded tax in Zimbabwe, but the ZIMRA director for legal and corporate services Ms Florence Jambwa said the figures were difficult to determine because smuggling was an underground trade.

South Africa, however, says it loses an estimated R40 million (US$2,9 million) to cigarette smuggling each year, on the average, more than half of it Zimbabwe-related.

And this is just from what is on public record. Customs officials from both countries admit the figures could be higher. Both are also greatly incapacitated to detect illegal trades quickly.

“It is difficult to measure the levels of smuggling as this is an underground activity mostly done through undesignated entry points,” said ZIMRA’s Jambwa, by email.

“The value of the potential loss cannot be easily ascertained,” she said, failing to provide an estimate.

Tax analyst Mr Tendai Mavhima said the figures from ZIMRA represent only a small portion of the actual amount of money Zimbabwe is losing to trafficking of cigarettes.

“The disparity in figures (ZIMRA and SARS figures) indicate there are problems in controls on either side, which may result in the revenue and tax losses from both countries being understated,” he said by telephone.

Zimbabwe is the world’s fifth largest producer of tobacco after China, the USA, Brazil and India.

The country produces flue-cured Virginia tobacco, considered to be of extremely high quality and flavour, according to a report on Zimbabwean tobacco companies by local stockbroking firm, IH Securities.

As such, Zimbabwean tobacco ends up in many top cigarette brands across the world, it says.

It is especially popular in China, the largest importer of Zimbabwean tobacco, and in South Africa, the country’s largest trading partner.

In South Africa, Zimbabwean cigarettes are on demand for two key reasons: high quality and affordability.

It costs just $1,50 for 20 sticks in Zimbabwe compared to $3,20 for the same number of sticks in South Africa, according to estimates by regional economic bloc, SADC.

The South African Revenue Service (SARS) said: “Cigarette clientele opt for cheaper cigarettes. The high supply and demand for illicit cigarettes creates the market for it.”

South Africa imposes very high taxes on cigarette imports – about 80 percent meaning many Zimbabwean dealers choose to export illegally.

SADC says illegal dealers supply nearly two thirds of the number of cigarettes smoked by South Africans.

In 2011 alone, at least 4 billion cigarettes smuggled into South Africa originated from Zimbabwe, it says.

The undeclared cigarettes are usually concealed in trucks, buses and other vehicles destined for South Africa by organised cartels, said Florence Jambwa of ZIMRA.

Sometimes the cargo is shipped at undesignated points on the porous border between the two countries. Source: Zimbabwe Herald

ContrabandA tobacco body has urged African governments to stamp out illegal tobacco trade, as their economies are losing billions of dollars in taxes annually. Tobacco Institute of Southern Africa (TISA) revealed that governments in the region are losing between US$20 billion and US$40 billion annually in taxes as a result of illegal tobacco trade, hence the need for collaboration among stakeholders to curb the vice.

This is contained in a statement issued by KPR Consulting Limited on Friday. “The size of the global illegal tobacco trade ranges between 330 and 660 billion cigarettes a year. These are cigarettes that are either smuggled, counterfeited or where tax is being evaded. “This equates to around six and 12 percent of global consumption, which deprives governments of between US$20 [billion] and US$40 billion a year in taxes,” the statement reads.

TISA, which is a regional body that represents tobacco traders, growers and processors, estimates illicit tobacco trade incidences in Zambia being between 20 and 30 percent. South Africa is rated among the top five countries globally when it comes to the trade in illegal cigarettes, with industry research estimating that around 23 percent of all cigarettes consumed in South Africa in 2014 were illegal. Commenting on the issue, British American Tobacco Zambia managing director Clara Mlambo cited weak penalties for criminals, poor border controls, low arrest rates and tobacco taxes creating intra-regional disparities as contributing factors.

Namibian police inspect over 1,000 boxes of impounded cigarettes at a roadblock in Rundu [Coastweek]

Namibian police inspect over 1,000 boxes of impounded cigarettes at a roadblock in Rundu [Coastweek]

Two suspects have appeared in a Namibian regional court Monday in connection with more than 1,000 cartons of cigarettes confiscated by the police Thursday last week.The two, both said to be Zimbabweans, appeared before a Rundu Magistrate in the northern Kavango region after their arrest over the 11.3 million Namibian dollars (940,000 U.S. dollars) cigarette contraband destined for South Africa.

The two were each charged with two counts of contravening the Custom and Excise Act 20 of 1998 and non-declaration of goods upon entering Namibia as well as the Prevention of Organized Crime Act 29 of 2004 of money laundering.

The accused persons were not asked to plead and their case was then postponed to July 8 for further police investigation. Acting on a tip-off, customs officials and the police raided two trucks en-route to South Africa and discovered 1,130 boxes that were hidden in fuel tankers. Source: http://www.spyghana.com/

Cigarettes+XXX+smokingRampant cigarette smuggling isn’t the problem in New York–“sky-high” tobacco taxes are, according to an op-ed by Patrick M. Gleason, director of state affairs at Americans for Tax Reform, in The Wall Street Journal.

Gleason’s opinion piece, titled “A Laffer Curve for Smokes,” digested here, takes the city and state of New York to task for their $180-million lawsuit against UPS over what officials allege was unlawful delivery of nearly 700,000 cartons of cigarettes. (A Laffer curve, named for economist Arthur Laffer, shows the relationship between rates of taxation and levels of government revenue.)

“This misguided lawsuit demonstrates once again that too many in government do not understand the root cause of cigarette smuggling. New York state levies the highest cigarette tax in the nation, $4.35 per pack, and New York City tacks on an additional $1.50 local tax. All told, the cost of one pack there can run to $12 or more.

“The result? Most of the cigarettes smoked in New York, 58%, are smuggled in from out of state, according to the nonpartisan Tax Foundation. The higher that revenue-hungry politicians raise tobacco taxes, the more profit smugglers can make.

“Politicians never learn. Of the 32 state tobacco tax increases that went into effect between 2009 and 2013, only three met or exceeded revenue projections, according to industry data.

“Lawmakers can claim they’re raising taxes on cigarettes to reduce smoking and improve public health. That talking point is belied by the recent imposition of taxes on electronic cigarettes, which are saving lives by delivering nicotine in puffs of water vapor instead of chemical-filled smoke. There are more than 15 tax bills pending across the country for currently untaxed e-cigarettes. Hawaii is proposing a tax of 80%, New York of 75%, Oregon of 65% and Ohio of 60%.

“For politicians, cigarette taxes are—and have always been—about one thing: money.

“New York state officials claim that the cigarette smuggling via UPS cost the treasury $29.7 million in lost tax revenue. That’s less than 0.03% of the state budget. The $4.7 million allegedly lost by New York City represents less than 0.006% of its budget.

“For a mere rounding error, state and city officials want to grab $180 million from UPS. That’s $180 million UPS could use to hire new workers, give employees raises, or invest back into its business. The leaders of New York and New York City should drop this silly lawsuit and find a more productive use of their time.”

Click here to view the full Wall Street Journal opinion piece.

Cigarettes+XXX+smokingThe nation awaits the 2015 Budget Speech with trepidation to know if income taxes will rise. But there is unanimous certainty there will, as per usual, be an increase in ‘Specific Excise Duties’. The only question is by how much? Taxation of cigarettes and tobacco products appears to be the path of least resistance for tax-collectors. It receives little backlash from the wider public (unlike e-tolls) and even support in some quarters.

The imposition of the so-called “sin taxes” on cigarettes and liquor products, in addition to generating significant fiscal revenues, does serve an economic purpose. Unlike normal goods and “necessity” products, cigarettes are not an essential good which people need to survive. As far back as the 1700s, Adam Smith averred “Sugar, rum, and tobacco, are commodities which are nowhere necessaries of life … are therefore extremely proper subjects of taxation.” Again, the notion of the importance of tobacco to the fiscal basket is exemplified in utmost simplicity and honesty – if a politician, or an emperor in this case can be believed –

This vice brings in one hundred million francs in taxes every year. I will certainly forbid it at once – as soon as you can name a virtue that brings in as much revenue [Napoleon III (1800s) – reply when asked to ban smoking]

Despite all the furore over public health and governments efforts to decrease the demand for cigarettes, South Africa is no different to other nations – annual tobacco revenues to the state coffers amounts to around R10 Billion! Another round of sin tax increases in the upcoming budget appears inevitable, and these increases are spawning a range of unintended (but not unexpected) consequences – the illicit trade. Source: Polity.org / DNA Economics.

CigarettesAn intricate web of smugglers, which reportedly involves manufacturers and middlemen, has been illegally carting cigarettes worth millions of dollars out of the country over the years, prejudicing the treasury of vital revenue.

Cigarette manufacturer, Savanna, has been fingered as one of the main culprits, while multinationals like BAT have also been mentioned in the illicit cross-border trade, mainly to South Africa.

Commonly smuggled brands include Remington Gold, Madison, Sevilles, Magazine Blue, Chelsea and Pacific Blue, manufactured by Savanna – which consistently denies smuggling.

A senior police sokesperson said “Even though we don’t always talk about it, we have managed to make significant arrests and the cases have been taken to court. The arrests include smuggling attempts at undesignated spots along the border and through official exit points such as Beitbridge”

A senior customs official told The Zimbabwean that cigarette smuggling, particularly through Beitbridge and Plumtree border posts, was difficult to arrest because of corruption.

“Policing at the border posts involves several agencies, namely the police, CIO (Central Intelligence Organisation), customs and special deployments from ZIMRA (Zimbabwe Revenue Authority). The problem is that these officers work in collaboration with the smugglers and haulage trucks and other containers carrying the cigarettes are cleared without proper checking. Hefty bribes are involved and the money is too tempting to resist,” said the customs official.

“You would be amazed how wealthy these officers have become. They have bought houses, luxury cars and send their children to expensive schools – yet their regular salaries are so low,” he added.

Immigration and customs officials, who also constantly liaise with their South African and Botswana counterparts and meet physically regularly, pretend to be checking the containers but clear them without completing the task, and know what the trucks and other carriers would be ferrying.

ZIMRA has four scanners for detecting contraband and an anti-smuggling team that also uses sniffer dogs, in addition to guard soldiers posted between the Zimbabwean and South African borders.

There are about 15 regular roadblocks along the Harare-Beitbridge road and 10 between Bulawayo and Plumtree that search trucks, buses and private cars. Despite this, the smuggling continues because of the collusion among the officials, said the source.

In early January, the Ferret team, a joint operation involving Zimbabwean and South African officers, intercepted a truckload of 790 Remington Gold cigarettes worth an estimated $119,000 destined for South Africa along the Masvingo-Beitbridge road. The smugglers were caught and arrested while offloading the cartons into small trucks. Source: The Zimbabwean

The MV Amaranthus moored on the west coast of Zakynthos. [Photo: Hellenic Coast Guard]

The MV Amaranthus moored on the west coast of Zakynthos. [Photo: Hellenic Coast Guard]

Authorities in Greece are trying to piece together the source of a large quantity of smuggled cigarettes found onboard an abandoned ship at the Greek island of Zakynthos.

The Hellenic Coast Guard reports that the local Port Authority found a large amount of contraband cigarettes in the cargo hold of the Palau-flagged MV Amaranthus while moored along the west coast of Ionian Sea island. No crew were onboard the ship at the time.

The ship is scheduled to be taken to the port of Zakynthos where the cigarettes will be confiscated by Border and Customs officials as investigators try to determine the owner of the ship and source of cigarettes.

The initial inspection of the ship was part of crackdown on organized crime particularly targeted towards cigarette smuggling. Source: GCaptain.com

Revenue officials unload the Shingle at Dublin Port after 32 million cigarettes were seized [Picture: Irish Mirror]

Revenue officials unload the Shingle at Dublin Port after 32 million cigarettes were seized [Picture: Irish Mirror]

Customs officers have scored a major victory in the battle against smugglers after seizing 50 million cigarettes in 10 months.

The Irish Mirror reports Revenue officers made 5,025 separate swoops between January and the end of October.

They also impounded 9,560kgs of tobacco in 867 operations.

The record haul makes 2014 one of the most successful to date in the war on counterfeit tobacco.

While these smuggled cigarettes would have cost the Exchequer tens of millions of euro they’re also more dangerous for smokers’ health.

And with the huge crackdown, Customs officers will be keeping up the pressure in 2015 to stub out the tobacco black market.

A Revenue spokeswoman told the Irish Mirror: “To the end of October, more than 50 million cigarettes were seized in 5,025 separate seizures while 9,560 kilogrammes of tobacco were seized in 867 seizures.

“This includes a major seizure in Drogheda in June in which officers, supported by An Garda Siochana, seized more than 32 million cigarettes and 4,500kg of water pipe tobacco.

“Combatting the illegal tobacco trade is, and will continue to be, a high priority for Revenue.

“Our work against this illegal activity includes a range of measures designed to identify and target those engaged in the supply or sale of illicit products, with a view to seizing them and prosecuting those responsible.”

Customs officials use tactics including risk analysis, profiling, intelligence and screening of cargo, vehicles, baggage and postal packages.

They also carry out random checks at retail outlets, markets and commercial shops.

The spokeswoman said: “This includes analysis of the nature and extent of the problem, developing and sharing intelligence on a national, EU and international basis.

“It also includes use of analytics and detection technologies and ensures optimum deployment of resources at points of importation.

“Revenue co-operates extensively with An Garda Siochana in combating the illicit trade, and relevant agencies in the State also work closely with their counterparts in the North, through a cross-border group on tobacco enforcement, to target organised crime groups responsible for a large proportion of the illegal tobacco market.

“In addition, cooperation takes place with other revenue administrations and with the European Anti-Fraud Office, OLAF, in the on-going programmes at international level.”

Last week, Last week, routine profiling helped customs officers seize 600,000 cigarettes at Dublin Port with a retail value of €304,000. Source: Irish Mirror

illicit cigarettesSouth Africa leads Africa in the illicit trade in tobacco and is listed among the top five illicit markets globally, according to the Tobacco Institute of Southern Africa, which represents tobacco growers, leaf merchants, processors, manufacturers, importers and exporters of tobacco products in SA.

More than R20bn in tax revenue has been lost in SA since 2010 due to the illicit trade in tobacco, the institute’s CEO, Francois van der Merwe, said on Wednesday. The problem is severe in SA, but Zambia, Namibia and Swaziland have estimated incidences of well above the global average of between 10% and 12%.

Mr van der Merwe said efforts to combat the illicit trade in tobacco were complicated by the links that the business had with transnational organised crime syndicates, some of which funded terrorism.

“The problem runs far deeper than enormous losses of fiscal income that could have been put to good use to bolster government efforts in education, infrastructure development and poverty alleviation,” said Mr van der Merwe.

He was speaking ahead of a meeting later in November of global, regional and local law enforcement, along with revenue and customs agencies in Cape Town, who will seek better ways to collaborate in addressing the illicit tobacco trade in sub-Saharan Africa.

“We have seen first hand what effective focus on combating illicit trade by government can achieve,” said Mr van der Merwe, ascribing a decrease in the illicit tobacco trade, from 31% to 23% this year, to better collaboration.

“This is in the most part due to the excellent efforts by the various law enforcement, customs and revenue, Treasury and defence departments in the South African government.”

Mr Van der Merwe said that although the declining numbers in SA were encouraging, this did not bode well for the rest of the region as organised crime was a moving target prone to shifting its focus to “easier” markets when it was under attack.

He claimed that those who traded in illicit products, whether cigarettes, alcohol, textiles or DVDs, or committed environmental crimes such as rhino poaching or abalone smuggling were most often also involved in other serious crimes and even the funding of terrorism and money laundering. Source: BDLive.co.za

Relate articles

o-ECIGS-570It seems the ‘e-industry’ is the vehicle for the next generation of contraband and illicit goods and Im not alluding to the electronics and entertainment industry here. While the World Health Organisation urges a ban on marketing of e-cigarettes, will the need for governments to consider taxes on such become necessary …read on:

E-cigarettes are following in the footsteps of their none-lectronic predecessors by utilizing advertising means no longer available to traditional cigarettes and increasing their ad spending on techniques such as television commercials, promotions, events, sample giveaways, celebrity endorsers, and slogans such as “A perfect puff every time.”

Electronic cigarettes are battery-powered devices that heat a nicotine solution into a vapor inhaled by users. While the chemicals of tobacco cigarettes are not included, the addictive feature of nicotine remains. The use of e-cigarettes has climbed steadily, with 6 percent of all adult Americans and 21 percent of adult smokers trying them in 2011, nearly twice the rates in 2010, according to the Centers for Disease Control and Prevention.

Unlike tobacco cigarettes, which are heavily regulated, e-cigarettes are free from laws that limit their methods of marketing. As a result, brands such as Blu eCigs have spent $12.4 million on advertising for the first quarter of 2013, up from less than $1 million last year. They feature endorsements from actor Stephen Dorff and personality Jenny McCarthy. Traditional cigarette companies such as Lorillard and Reynolds are also getting in on the action by purchasing or launching their own lines of e-cigarettes.

The advertising itself even references tobacco cigarettes, with campaigns that seek to make smoking acceptable again. In a Blu eCigs ad, for example, Dorff praises e-cigarettes because they can be smoked “at a basketball game . . . in a bar with your friends . . . virtually anywhere,” adding, “Come on, guys, rise from the ashes.”

But with the increased profile may come regulation.

“It is beyond troubling that e-cigarettes are using the exact same marketing tactics we saw the tobacco industry use in the ’50s, ’60s and ’70s, which made it so effective for tobacco products to reach youth,” Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, told The New York Times. “The real threat is whether, with this marketing, e-cigarette makers will undo 40 years of efforts to deglamorize smoking.”

WHO urges countries to adopt global guidelines that will end the indoor use of e-cigs. WHO also calls for a ban on marketing practices that could encourage children and non-smokers to use e-cigs.

States such as Indiana, New Jersey, North Dakota, Mississippi, and Utah have already extended restrictions on tobacco cigarettes to include e-cigarettes, while other states such as California and Pennsylvania are considering similar laws. Inhalation of e-cigarettes is prohibited on Amtrak trains and onboard U.S. planes.

The Food and Drug Administration is said to be planning the release of proposed regulations in October. Referencing a report from the financial group CLSA Americas, AdAge reported that the agency is expected to propose a ban on TV advertising to set limits on sales to minors, implement the possibility of a warning label, and restrict online sales. An FDA spokesperson said she could not comment on specifics of a proposed rule, but that the agency “intends to propose a regulation that would extend the agency’s ‘tobacco product’ authorities – which currently only apply to cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco – to other categories of tobacco products that meet the statutory definition of ‘tobacco product.’ Further research is needed to assess the potential public health benefits and risks of electronic cigarettes and other novel tobacco products.”

Why it matters: The increasing use and potential regulation of e-cigarettes may trigger another round of tobacco wars between industry and the government. Debate about the product remains – is it an alternative form of smoking, or a means of quitting, like nicotine gum? Should e-cigarettes be taxed and regulated like traditional tobacco products, with age limits, warning labels, and a ban on certain forms of advertising such as TV, or are they a separate and distinct category of products? If and when the FDA wades into the issue, the fight will truly begin. Source: Manatt Phelps & Phillips LLP

Related article

Tobacco-Wars-350x207The Business Times article “BAT hauled to court over spy claims” published Sunday, 31 August reveals, if nothing else, a web of spying and skulduggery within the tobacco industry. Guaranteed we haven’t heard the last of this saga yet……read on:

British American Tobacco (BAT) could have its dirty linen aired in court following a sensational high court application launched by local “value brand” producer Carnilinx for alleged “corporate espionage”.

In the application, Carnilinx director Kyle Phillips claimed BAT paid Pretoria attorney Belinda Walter for commercially sensitive information she obtained while “infiltrating ” the company and the FairTrade Independent Tobacco Association (Fita) in 2012 and 2013. If this goes to trial, these spy claims could be extremely damaging for BAT, which is based in London and is the largest company listed on the JSE Securities Exchange, worth R1.26-trillion.

“BAT has used unlawful means to interfere in the business of the applicant. It has paid [Walter] monies to spy [on Carnilinx],” Mr Phillips claimed.

Ms Walter acted as the attorney to Carnilinx and as chairwoman of Fita, an industry body ostensibly established to represent South Africa’s smaller tobacco manufacturers.

Carnilinx is headed by Adriano Mazzotti, who donated cash to the Economic Freedom Fighters, which helped it to contest the May election.

Mr Mazzotti’s company is asking the court to interdict Ms Walter from providing any further information to BAT and to stop BAT unlawfully “interfering with its trade”.

Carnilinx’s application is based on Ms Walter’s “confession” during a meeting in February, in which she detailed her role as an informant for the government’s State Security Agency, which allegedly introduced her to Forensic Security Services (FSS).

This private security firm works for the Tobacco Institute of SA (Tisa), which represents the larger tobacco producers, notably BAT.

This journalist witnessed Ms Walter’s admissions at that meeting. In its legal papers, Carnilinx said FSS then “introduced Walter to BAT, to whom she would give information on the smaller manufacturers”.

Mr Phillips goes further, saying Ms Walter proposed creating Fita in the first place so “she could infiltrate all the smaller tobacco manufacturers”.

“The first Fita meeting was held late in 2012, at Walter’s offices, which Walter admits with her compliance and knowledge was bugged by FSS.

For the information she fed to BAT, Walter was paid,” he said. In Ms Walter’s opposing affidavit, filed on Friday, she claimed she was under “extreme emotional distress” during that meeting with Carnilinx in February, because of physical threats against her and her son.

She denied “any commercial or attorney-client relationship with BAT South Africa”, and said she was “nothing but a thorn in their side”.

When asked by the Sunday Times this week, Ms Walter did not deny that she fed information to BAT’s London office, or that she had knowingly allowed the first Fita meeting to be recorded by FSS. But she said the leaking of information was common practice among Fita members.

Instead, in her court papers, she mounted a scathing attack on her former client, Carnilinx.

“Carnilinx also attempts to paint a picture that they are ‘victims’, choir boys in the church choir. This is simply not the case,” she claimed.

Ms Walter said she could say “with confidence” that almost all Fita members provided information on each other to law-enforcement agencies about widespread “dealings in illicit products and criminal activities”.

She claimed Carnilinx employed “its own investigators to spy on competitors, rat out its competitors to law-enforcement agencies and provide substantial information on illicit trade of its competitors to the South African Revenue Service” (SARS), and that “at least one Carnilinx director is a paid SARS informant”.

Ms Walter resigned as attorney to Carnilinx, and soon after as chairwoman of Fita last November after becoming romantically involved with the head of SARS’s enforcement division, Johann van Loggerenberg.

That relationship ended “acrimoniously “, prompting Ms Walter to lay complaints with SARS against Van Loggerenberg, in which she claims he divulged confidential taxpayer information relating to his investigations into Carnilinx, among others.

Now Carnilinx is claiming Ms Walter “fed information on Carnilinx to SARS “. In response, Ms Walter alleged that Carnilinx was offered “tax leniency” in exchange for filing the application against her — an allegation Mr Mazzotti has denied.

Ms Walter has asked the court to order that if this case goes ahead, SARS and Mr Van Loggerenberg should be “forced to put pen to paper and make affidavits in response to my allegations of the corrupt conduct and collusion in this malicious and vexatious application”. Source: The Sunday Times (Business Times)

Related article

Examples of cigarette and cigar products - Photo: GAO

Examples of cigarette and cigar products – Photo: GAO

A 2009 law that raised federal taxes to discourage smoking cost the U.S. government billions of dollars in lost revenue as manufacturers relabeled products and consumers shifted to cheaper pipe tobacco and large cigars, the U.S. Government Accountability Office said in a report released on Tuesday.

The GAO estimated $2.6 billion to $3.7 billion in lost revenue from April 2009 to February 2014 as manufacturers exploited loopholes in the Children’s Health Insurance Program Reauthorization Act which raised taxes for smoking-tobacco products.

“Each of the three tobacco manufacturers that agreed to speak with us explained that their companies switched from selling higher-taxed roll-your-own tobacco to lower-taxed pipe tobacco to stay competitive,” the congressional watchdog agency said in the report, which was the focus of a Senate hearing on Tuesday.

At the hearing, Liggett Vector Brands LLC Chief Executive Ronald Bernstein urged lawmakers to take action against abuses by manufacturers.

He held up two seemingly identical, but differently labeled non-Liggett bags of tobacco. Showing a third sample, he pointed out that a label saying “all-natural pipe tobacco” covered up a statement that the bag “makes approximately 500 cigarettes.”

“Everyone knows this is cigarette tobacco,” Bernstein said. “The manufacturer knows. The consumer knows. And I know. I know because I tried smoking it in a pipe and it was not a pleasant experience.”

Some manufacturers also add a few ounces of tobacco to small cigars so they qualify as the larger product. Others even mix in clay or kitty litter to increase the weight, Michael Tynan, policy officer at the Oregon Public Health Division, told the hearing.

The GAO said the tobacco market shifted accordingly. Yearly sales of pipe tobacco rose more than eight-fold from fiscal 2008 to 2013, while sales of roll-your-own tobacco declined almost six-fold. Over the same period, large cigar sales doubled, while small cigar sales dropped to just 700 million from 5.7 billion.

Senate Finance Committee Chairman Ron Wyden, who convened the hearing, criticized the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB), which is responsible for collecting tobacco taxes and cracking down on evasion, for “footdragging.”

In recent years, the agency has pushed to apply “advanced investigative techniques to uncover illicit trade and fraudulent activity,” including deploying about 125 auditors and investigators, the TTB wrote in its Senate testimony.

Responding to a push to better differentiate between roll-your-own and pipe tobacco, the agency published an “advanced notice of proposed rule making” in 2010 and 2011. But no rule had yet been issued, the GAO wrote.

In 2015, the TTB will issue a proposed regulation cracking down on the illegal activities, TTB Administrator John Manfreda said on Tuesday. Source: nbcnews (contributed by Z Taylor)

OLAFAlmost 45 million smuggled cigarettes, nearly 140.000 litres of diesel fuel and about 14.000 litres of vodka were seized during a major Joint Customs Operation (JCO). The Operation code-named “Warehouse” was carried-out in October 2013 by the Lithuanian Customs Service and the Lithuanian Tax Inspectorate in close cooperation with the European Anti-Fraud Office (OLAF), and with the participation of all 28 EU member states. As a result of Operation “Warehouse”, a significant potential loss to the budgets of the European Union and its Member States was prevented. According to preliminary estimates, this would have amounted to about € 9 million in the form of evaded customs duties and taxes. The final results of the Operation were discussed by the participants last week at a debriefing meeting in Vilnius and were made public today across Europe.

Algirdas Šemeta, Commissioner for taxation, customs, anti-fraud and audit, welcomed the very good results of the operation. “The fight against the smuggling of excise goods is one of our political priorities and we have launched a number of initiatives to better equip Europe against such harmful practices being run by organised criminal networks. JCO Warehouse is a good example of how the EU and Member States’ authorities can cooperate effectively to protect their revenue. Joint Customs Operations safeguard the EU’s financial interests and also protect our citizens and legitimate businesses”, he said. “Such Operations also highlight the added-value of OLAF in helping facilitate the exchange of information between our partners across Europe and in providing effective operational support.”

Operation “Warehouse” focused on cargo movement by road transport. It targeted the smuggling and other forms of illegal trade of excise goods such as mineral oil, tobacco products and alcohol throughout Europe. By using several complex scenarios in multiple EU Member States, fraudsters lawfully import goods into the EU but request a VAT and excise exemption by declaring the goods as subject to tax and duty exemption regimes (e.g. declaring the goods to be in transit). The trace of the goods is then lost through the fictitious disappearance of the traders or through a fictitious export. Fraudsters avoid paying VAT and excise duties, but the goods remain in the internal market, causing a substantial loss to the EU’s and Member States’ revenues.

JCO “Warehouse” was the first Operation carried-out in close cooperation with tax authorities to target excise and VAT fraud specifically, besides customs fraud. For the first time, customs and tax authorities cooperated on a European scale in a JCO. This is a significant achievement since the different competences and legal regimes applicable at national and EU level make it difficult to address complex fraud schemes with uniform measures. In this Operation, customs and tax authorities joined their expertise, resources and shared intelligence to prevent losses to the EU’s and Member States’ budget.

Eight seizures were made during the Operation. Among these, authorities seized 6.617.400 cigarettes in Sweden and Lithuania; 135.831 litres of diesel in Poland and the United Kingdom, and 14.025,6 litres of vodka in United Kingdom alone. Overall, 44.957.160 cigarettes were seized.

During the entire Operation “Warehouse”, OLAF provided organisational, logistical, financial and technical support to allow for an exchange of information and intelligence in real-time. This was coordinated from the Physical Operational Coordination Unit (P-OCU) at the OLAF premises in Brussels which facilitated direct communication with the national contact points. A group of liaison officers from some Member States representing all the participating 28 EU countries, worked from here during the Operation and experts from the Commission’s Directorate-General for Taxation and Customs Union provided support.

EUROPOL participated as an observer in the Operation. A representative of the office was present at the P-OCU during the operational phase of the operation. It was also possible to make direct cross-checks of suspect individuals and companies appearing during the JCO with EUROPOL via a secure internet connection. Source: EU Commission

Pacific Blue_SnapseedRelatives of President Robert Mugabe are being linked to illegal tobacco smuggling networks suspected of bringing more than $48 million in contraband through South Africa’s borders, reports NewZimbabwe.com.

Harare-based Savanna Tobacco is owned by a prominent Zimbabwean businessman, Adam Molai, who is married to Sandra Mugabe, one of Mugabe’s nieces. Molai has previously worked with Sandra as co-director of the Zimbabwe Tobacco Growing Company. Savanna has allegedly moved tons of illegal tobacco into South Africa.

The company’s main brand, Pacific cigarettes, has been found in concealed consignments by police in South Africa and abroad, according to two private investigators who track tobacco busts and work for the industry to counter the trade in illicit tobacco. The products have been linked to a huge tobacco smuggling operation whose base in South Africa was shut down in 2010 by the South African Revenue Service (SARS), which is engaged in a crackdown on the country’s illegal tobacco markets.

Images taken at the scene of two busts in South Africa and one in Zimbabwe show the extent of the smuggling operation. SARS has refused to confirm or deny whether it is investigating Savanna, citing the confidentiality requirements of the Tax Administration Act.

The frequency of the busts, the methods used and the quantities of illegal Pacific cigarettes found have led sources close to the investigations to claim that Savanna has been centrally involved for at least four years. It also increases suspicions that Zimbabwe is using smuggling to keep its economy afloat. Mugabe has openly supported Savanna. A year ago, he accused rival British American Tobacco (BAT) of spying on Savanna and hijacking its trucks. “If this is what you are doing in order to kill competition and you do it in a bad way, somebody will answer for it,” Mugabe warned.

Boxes of cigarettes that can be made for as little as R1.50 are easy to slip into the local market to avoid the R13 tax a box. Whereas popular brands of cigarettes can retail at R35 a pack, illegal cigarettes sell for between R4 and R12 a pack. With margins approaching 1000%, the illicit trade has become one of the largest elements in organised crime in South Africa.

According to research commissioned by the Tobacco Institute of South Africa, which is predominantly funded by BAT, 9.5billion illegal cigarettes with a street value of about R4-billion were smoked locally last year.

Savanna has captured almost 10% of this market, according to the institute, with about 700 million of its illegal cigarettes smoked last year. Pacific’s illegal cigarettes are sold mostly on the streets of Cape Town.

In one of the biggest busts in October, 1.6million Pacific cigarettes were found hidden on a train in Plumtree. Pacific cigarettes have also been seized at the Beitbridge border post near Musina and in Boksburg, on the East Rand, during busts in November. Trucks were found carrying Pacific cigarettes in concealed compartments.

This month, a consignment of Pacific cigarettes was found hidden behind electronic goods on a truck in the Western Cape. Similar busts have been made in Mozambique and at a border post between Zambia and Namibia, according to private investigators.

Evidence from the Plumtree train bust showed that the smuggling route had its origin as Savanna’s factory in Zimbabwe and South Africa’s black market as its destination. In the Plumtree bust on October 12, Zimbabwean police confiscated 40 tons of illicit Pacific cigarettes that had come from Bulawayo. The train was said to be carrying gum poles.

Records reveal that between September 2012 and August 2013 at least 23 shipments with 44 wagons of “gum poles” had followed the same route. A number of these consignments appear to have arrived at the South African business PFC Integration. According to an investigator who has studied the operation, PFC is “not into the gum pole business at all”.