Saint Lucia
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Could Impending Excise Tax on Tobacco Fuel Illicit Trading?

WITCO’s Justin Ram
WITCO’s Justin Ram

Caribbean countries have joined the global forum in expressing their concerns over the illicit trade of tobacco in the region, which they say hampers revenue generating for both governments and retailers.

Additionally, the retailers are also concerned about the consequences of the excise tax that government is about to implement on the sale of tobacco. 

Towards this cause, last Friday, staffers from Peter & Company Distributors – PCD and other local tobacco retailers’ representatives held an interactive discourse to gain more knowledge on the matter. 

Justin Ram, Legal and External Affairs Executive at West Indian Tobacco Company Limited (WITCO) explained that the session was aimed at sensitising retailers about the risks involved in the ‘Excise Shock’ format, implemented by government.

“Recently …they introduced a 100% increase, which we have seen in other markets will cause an Excise Shock that will directly relate to illicit trade and a Tax Revenue loss,” Ram told reporters, aside the seminar.

“We are trying to apprise the retailers of the risks associated with Excise Shocks and how we can advocate for more balanced and fair excise margins,” he added.

Said Ram: “An excise shock will lead directly to illicit trade. So, illicit traders deal in illegal tobacco, which is not ‘duty paid’ so that will cause a revenue loss for the government.

“These illicit traders are involved in criminal enterprise across many facets of crime …and not only illicit tobacco, but drug trafficking, human trafficking and other forms of crime. And illicit tobacco is used as a revenue generator for that sector, which is why we need balanced and fair excise management,” he added.

In proposing measures to help curb the illicit trade practice, he stated: “We can put a stop by enforcement, by advocating for more enforcement through Saint Lucia Bureau of Standards (SLBS). But also, by implementing phased excise increases; so instead of a 50% or 100%, a 10 % or 20% or something tied to inflation so the consumer, in the end, does not feel the shock and the burden. Because, it’s easier to accept a 25cents increase than $1.00 increase on something you buy regularly.”

A publication in the government’s Gazette sates that a 100% excise increase will be implemented from August 2.

Reiterating his point, Ram declared: “An excise shock is dangerous, not only to the government because of tax revenue loss, but to the average citizen because of its link to crime. And fair and balanced excise management is the way to go to ensure that does not occur.”

He noted that any attempts by retailers to fuel this illicit trade, will be in the long run “dangerous for themselves and the government, as well as, the average citizen because by fueling illicit trade, you are fueling criminal enterprise which in the end hurts your wallet.”

In his presentation to the tobacco retailers, Ram said, it is anticipated that government is likely to recoup at least $9 million from the “excise increase on tobacco”.

He referred to the Swift Justice Project, which is a “$2miiilon allocation for the judiciary”, plus the Health and Security Levy to be implemented by government 

Ram explained that the Swift Justice Project as stated by the United Nations (UN) necessitates “a basic principle of law …meant to relieve any backlog in cases in the current judiciary, to ensure that citizens and businesses can get justice as quickly as possible”.

The WITCO official noted that the “illicit market” fuels gang warfare, political unrest and criminal enterprise. He said the illicit trade fuels “all criminal activity” that includes drug trafficking, human trafficking and other violent crime.

“Based on a 2020 survey, over 600 billion illegal cigarettes were consumed, which accounted for 12 % of all consumed cigarettes,” Ram explained. “And one in every ten consumed was illicit, which cost the world governments’ billions of dollars.”

He said the illicit trade sub-sector, falls behind counterfeiting, drug trafficking, human trafficking and illicit tobacco”.

Added Ram: “So, illicit tobacco is a key revenue generator for criminal enterprise for all of these other violent and illegal activities.”