Measuring Illicit Tobacco Markets

Transcription

1 3rd International Conference on Governance, Crime and Justice Statistics UNODC- INEGI Merida (Mexico) 7-10 June 2016 Measuring Illicit Tobacco Markets Ernesto U. Savona Director and Professor Transcrime

2 This presentation Explains the importance of systematically measuring the scale of illicit activities through comparable instruments Makes reference to the UN system of national accounts as endorsed by the United Nations Statistical Commission Explains the European System of National and Regional Accounts as promoted by the European Union explaining its guidelines for tobacco and alcool Considers the ways of compliance of different member states Quotes the recent international research contributions in the area of tobacco measurement 2

3 Why measuring illicit tobacco markets? Illicit tobacco markets as many dual markets (licit and illicit) produce social costs and benefits to criminals. The measurement of their scale could help cross-comparative analyses among countries (horizontal) and in the regions of the same country (vertical) This knowledge, if continuously updated, could help focusing on initiatives to mitigate problems and assess their impact 3

4 The International Framework The System of National Accounts (SNA) is the internationally agreed standard set of recommendations on how to compile measures of economic activity. It is endorsed by the United Nations Statistical Commission. The origins of the SNA trace back to the 1947 Report of the Sub-Committee on National Income Statistics of the League of Nations Committee of Statistical Experts under the leadership of Richard Stone. Both the SNA 1993 and the SNA 2008 argue that illegal activities should be included in the measurement of the economic activity. 4

5 ESA- European System of National and Regional Accounts European equivalent of the UN System of National Accounts (SNA) Harmonised methodology that must be used for the production of national accounts data in the European Union (EU) Internationally compatible, allows a systematic and detailed description of an economy Ensures comparability in measuring Gross National Income (GNI) across EU countries ESA requires the inclusion in GDP of illegal economically productive activities in which all parties take part voluntarily 5

6 ESA- European System of National and Regional Accounts Why including illegal activities? GDP is about measuring all economic activities. Illegal activities that have the characteristics of transactions particularly when there is mutual agreement between the parties should be treated the same way as legal activities Common methodological guidelines on how to measure illegal activities for statistical purposes Three areas of illegal activities: Prostitution Production and trafficking of drugs Smuggling of alcohol and tobacco products 6

7 ESA- Proposed Methodology Basic model to estimate smuggling of alcohol and tobacco products: the goods are not differentiated The accounting rules consist in balancing supply (domestic output and imports) and demand (intermediate consumption, final consumption and exports) estimated at a relatively high degree of detail ESA proposes a methodology based on the multiplication of quantities and prices. Both the supply and demand side-based approaches make the best use of available data A demand side-based approach is recommended 7

8 ESA- Proposed Methodology Tobacco products are smuggled illegally cross the border, involving a change of ownership between residents and non-residents 1 Step: Exports by the exporting countries up to the border are calculated as follows: Exports: Quantity X Price Imports: Quantity X Import Price The export/import price can be approximated with the price of tobacco products in the exporting country wholesale It is assumed that smuggled goods do not enter the legal chain and are sold directly to households distribution 8

9 ESA- Proposed Methodology 2 Step: The sale value of smuggled tobacco is calculated as follows: Sales = Quantity x Price(sale) The average sale prices of smuggled tobacco products need to be estimated based on expert estimates. 3 Step: The output is equal to the trade margin achieved for smuggled tobacco products: Trade Margin= Sales - Imports 9

10 ESA- Proposed Methodology The choice of a demand or supply side-based approach should depend on the quality of available sources: Demand side-based approach 1 Step: to estimate total domestic consumption of smuggled goods by: Identifying consumption patterns in relevant breakdowns (survey) Or analysing waste to identify the share of non-declared cigarettes in total consumption 2 Step: to estimate the smuggled quantity by: Subtracting legal sales from total domestic consumption and subsequently subtracting direct imports by households (travel expenditure) The export/import price can be approximated with the average wholesale price of the relevant good in the main exporting country or countries of origin. 10

11 EU Member States Compliance Not all EU Member States include illegal transactions in GDP, some have included only prostitution and drugs In the Netherlands, where prostitution and some drugs are legal, official statistics already included these activities in GDP The UK National Accounts includes smuggling of alcohol and tobacco within the estimate of imports of goods and household final consumption expenditure Sweden, the Netherlands, Italy, Belgium and France have followed ESA guidelines to estimate the illicit market of smuggled tobacco products 11

12 EU Member States Compliance Time series for tobacco smuggling based on surveys on the number of daily smokers in the population. Figures on registered cigarette sales could then be compared with total consumption demand based on the number of daily smokers. Sweden The time series calculated from the first report of the survey and a combination of price increases of sold registered cigarettes give the following estimates in current prices: 12

13 EU Member States Compliance The Netherlands The total consumption of cigarettes is the product of the consumption of cigarettes per capita and the size of the Dutch population Imports of illicit cigarettes minus seizures (M-S) are calculated from the seizures by the customs (s), an estimate of the detection or seizure rate (R) and the import price (pm) 13

14 EU Member States Compliance Seizures data are taken from the website of the Ministry of Finance. To smooth incidental fluctuations they used 3-year moving averages. The seizure rate is fixed at 10 percent The Netherlands As the domestic production of illicit cigarettes is negligible, exports (e) equal imports (m) minus domestic consumption (c). 14

15 EU Member States Compliance To estimate the value of smuggled goods (alcohol and cigarettes), Italy relies on supply indicators: internal demand is derived from seizures data Italy Legal sales come from imports, whereas exports are assumed to be null The quantity of seized smuggled tobacco products is brought to the potential value of internal demand through a coefficient representing control capacity of the phenomenon by law enforcement This estimate determines the quantity of cigarettes intended for final internal consumption 15

16 EU Member States Compliance It is assumed that there is no output of illegal cigarettes in Belgium Belgium The profit margin is estimated on the basis of the respective price difference between domestic sales of illegally imported cigarettes and the re-export of illegally imported cigarettes Household final consumption expenditure is calculated by multiplying the price by the quantity of smuggled tobacco products, being equal to a fraction of official sales 16

17 EU Member States Compliance Belgium The volume of illegally imported goods is determined on the basis of data on seizures provided by police and customs and corresponds to the average quantity of goods seized multiplied by the probability of being caught and also adjusted for transit For exports, a method consisting in multiplying the price by quantity has also been developed, with the quantity being estimated on the basis of the total volume imported (including transit) minus the quantity consumed 17

18 EU Member States Compliance France only includes the contraband of tobacco products on its national accounts (no drug trafficking or prostitution). France The French Health Barometer gathers data on consumption of different types of tobacco products (in tonnes). Estimates on cross-border tobacco product sales are derived from annual variations on local tobacco product sales in French Departments: when low sales are recorded in border regions, it is assumed that tobacco products are being bought across the border. 18

19 Challenges Lack of structured statistical information on production, prices and sales/ Reliability of the estimates. Double counting: possible that illegal activities are at least partially already included in the estimates. 19

20 Estimates of the ITTP at national level KPMG Project Star/Sun based on: legal domestic sales and consumption, cigarette inflows and outflows, EPSs (Empty Pack Surveys) data, tourism and travel data. Euromonitor International based on: customs seizures, data on production, import, export and legal sales of cigarettes, EPSs data, interviews with stakeholders (e.g. owners, retailers, customs officers), data on the national environment (e.g., porous borders, economy, politics, smoking population). 20

21 Estimates of the ITTP at sub-national level (1) Transcrime in the European Outlook on the Illicit Trade in Tobacco Products estimates the ITTP at sub-national level. The report is available at: uropean-outlook-on-the- ITTP.pdf 21

22 Estimates of the ITTP at sub-national level (2) The main source is the national KPMG data on the ITTP. These data are spread through the regions using three different criteria: EPSs (Empty Pack Surveys), Regional Smoking Prevalence, Regional Adult Population. The ITTP in one region is calculated by multiplying the national estimate of the ITTP by a factor considering the smoking population at subnational level (S p ), by a factor considering the prevalence of non-domestic and counterfeit cigarettes (EP r )at subnational level. 22

23 Estimates of the ITTP at sub-national level (3) The smoking population at sub-national level (S p ) is the ratio between smokers in the area and smokers in the entire country in any given year. To calculate the subnational prevalence of non-domestic and counterfeit cigarettes (EP r ), Transcrime subtracted the estimated number of cross-border purchases in one area to the number of non-domestic sticks in the same area. The result is divided by the total number of sticks collected within the area in any year. Due to the estimation methodology, the sum of the subnational estimates may differ from the initial national estimate by KPMG. For consistency reasons, the study adjusted the subnational estimates with a linear transformation so that the sum of the subnational estimates equalled the national estimates by KPMG. 23