Objective: In France, cigarette sales have fallen sharply, especially in border areas, since the price increases of 2003 and 2004. It was proposed that these falls were not due to people quitting smoking but rather to increased cross-border sales of tobacco and/or smuggling. This paper aims to test this proposition.
Methods: Three approaches have been used. First, cigarette sales data from French sources for the period 1999–2006 were collected, and a simulation of the changes seen within these sales was carried out in order to estimate what the sales situation would have looked like without the presence of foreign tobacco. Second, the statements regarding tobacco consumed reported by the French population with registered tobacco sales were compared. Finally, in order to identify the countries of origin of foreign tobacco entering France, we collected a random sample of cigarette packs from a waste collection centre.
Results: According to the first method, cross-border shopping and smuggling of tobacco accounted for 8635 tonnes of tobacco in 2004, 9934 in 2005, and 9930 in 2006, ie, between 14% and 17% of total sales. The second method gave larger results: the difference between registered cigarette sales and cigarettes declared as being smoked was around 12 000 to 13 000 tonnes in 2005, equivalent to 20% of legal sales. The collection of cigarette packs at a waste collection centre showed that foreign cigarettes accounted for 18.6% of our sample in 2005 and 15.5% in 2006. France seems mainly to be a victim of cross-border purchasing of tobacco products, with the contraband market for tobacco remaining modest.
Conclusion: in order to avoid cross-border purchases, an increased harmonisation of national policies on the taxation of tobacco products needs to be envisaged by the European Union.
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Article 15 of the World Health Organization’s Framework Convention on Tobacco Control recommends that the signatory nations carefully monitor the illegal trade in tobacco products.1 This recommendation has been issued with the aim of improving tobacco control while at the same time ensuring that national policies involving tax increases on tobacco products with the aim of reducing consumption are not compromised by the easy availability of tax-free or reduced tax products.2–4
In the European Union, the implementation of the so-called “Schengen” agreements for the free circulation of merchandise have meant that tobacco purchased within the borders of the European Union can now circulate freely. Each member state is however free to set its own limits on the quantities of tobacco considered as being intended for personal use only, and is consequently able to limit the quantities of tobacco entering its country. Thus, in order to avoid tax avoidance on a large scale (as tobacco products are subject to high levels of indirect taxes), French regulations have set a maximum legally transportable weight. It is forbidden for any individual to travel with more than 1 kg of tobacco in France. The imposition of this limited quantity means that it is effectively illegal to purchase tobacco more cheaply in another European country and to import it into France when the weight exceeds 1 kg.
The monitoring of tobacco smuggling and legal and illegal cross-border purchases is important for another reason. Almost a third (32.5% in 2005) of taxes collected from tobacco sales are used to finance the French health system. Consequently, if part of this tax levy is not collected due to smuggling and cross-border purchases, an accounting problem may well arise in the future, with current smokers of foreign tobacco failing to collectively finance future state expenditure on their health.
Several years ago, France was listed among those countries least likely to be the victim of tobacco smuggling or cross-border purchases.5–7 However, following the steep increases in taxes on tobacco products in October 2003 and January 2004 (the usual price of a pack of cigarettes for the most popular brand increased by 44.7% between 2002 and 2004; by 39.2% if we consider the tobacco price index, and 36.6% for the relative price), no up to date assessment has been carried out of the French situation with regard to the smuggling and cross-border purchasing of tobacco. The aim of this paper is to fill this gap by using three different approaches to carry out such an assessment.
Firstly, we began by assessing what would have been the state of tobacco sales in the French “departments” (a French county is a department) if these sales had developed in the same manner as the sales for the French “department” experiencing the lowest fall in sales (study 1). Secondly, we compared the tobacco consumption levels declared by the French public with registered (ie, tax paid) sales of tobacco (study 2). Finally, the collection of cigarette packs from a waste-sorting centre has enabled us to have a qualitative, though unfortunately non-representative, overview of the foreign cigarette packs available in France (study 3).
STUDY 1: THE SIMULATION OF DEPARTMENTAL TOBACCO SALES
Data and methods
We possess the data for sales of manufactured cigarettes on a department by department basis between 1999 and 2006. This data has been supplied by Altadis (Paris, France), which has a virtual monopoly on distribution. As shown in fig 1, the sales data shows that sales have fallen sharply since 2003 and 2004, following the application of major increases in taxes on tobacco products.
The decline in cigarette sales varies according to the departments concerned. These differences in sales can be explained by cross-border purchases made by smokers as shown in fig 2 (all of the departments displayed negative growth rates over this period). Indeed, cigarette prices are lower in the countries bordering on France and it should be noted that the sharpest falls in sales are located around the borders.
In order to be able to carry out a simulation with the aim of estimating the number of tonnes of tobacco purchased in neighbouring countries or smuggled, we based our calculation on the assumption that the department having experienced the lowest fall in tobacco sales has not been the victim of smuggling or cross-border purchases. Based on this hypothesis, we applied the growth rate for this department to all of the other departments in order to see how sales in these areas would have developed. Four periods were considered: 1999–2003, 1999–2004, 1999–2005 and 1999–2006. We began with this initial period for two reasons. The first is that this corresponds to the first major increase in tobacco taxes. The second is that prior to 2003, a number of departments witnessed an increase in their tobacco sales, which prevents us from using our simulation method.
For the first period examined, our benchmark department was the Var, which showed a fall of 9.07% in sales. For the second and third periods, the benchmark department is the Côtes d’Armor, with falls of tobacco sales of 23.5% and 22.63%, respectively. Finally, for the third period considered, the department in which cigarette sales fell the least was the Alpes-de-Haute-Provence, which witnessed a fall of 21.26%.
These growth rates were then applied to the cigarette sales of all French departments since 1999 for the four periods considered. This enabled us to obtain a simulation of what cigarette sales would have been in all the departments in 2003, 2004, 2005 and 2006 if cross-border purchases or other forms of tobacco smuggling had not taken place, or at least if these forms of smuggling had occurred at the same level of intensity as in the benchmark departments. In other words, we have applied the following equation:
represents the sales of tobacco in the department i for the year t1 and r is the growth rate for tobacco sales in the benchmark department over the period t0–t1. The sales for department i for the year t0 are represented by:
Study 1 results
Based on the simulations carried out, the volumes of tobacco derived from cross-border purchases or smuggling totalled 2178 tonnes in 2003 (2.72 billion cigarettes, based on the assumption that a cigarette weighs 0.8 g), 8635 tonnes in 2004 (10.8 billion cigarettes), 9934 tonnes in 2005 and 9930 tonnes in 2006 (12.4 billion cigarettes). With the exception of 2003, these estimates account for between 14% and 17% of total annual cigarette sales in France over the period 2004–2006. The consumption of manufactured cigarettes and hand-rolled cigarettes per adult per day was 3.9 and 0.4 in 2003.8 We need to add 0.15 cigarettes per adult per day to our estimate from 2003. In 2006, the same consumption indicators were 3.0 and 0.5, to which should be added 0.67 of tobacco derived from smuggling or cross-border purchases.9
If we apply these estimates to the recorded sales figures, we can see in fig 1 that the recent sharp increases in taxes on tobacco products (aimed at reducing consumption) have been undermined by these illegal or unregistered sales.
As is the case for Canada,10 purchases of untaxed tobacco have partially compromised the price elasticity of demand for tobacco. This price sensitivity has been estimated at close to zero for the French departments located closest to the country’s borders.11
STUDY 2: TOBACCO SALES ESTIMATES BASED ON CONSUMPTION DECLARATIONS
Data and methods
The Health Barometer is a national survey aimed at studying behaviour, attitudes and perceptions in the health field. This survey is carried out by the National Institute for Prevention and Health Education (Institut National de Prévention et d’Education è la Santé; “INPES”), the social security system (CNAM) and the French Monitoring Centre for Drugs and Drug Addiction (the Observatoire Français des Drogues et des Toxicomanies; “OFDT”) and financed by the Ministry of Health, CNAM and OFDT. The most recent survey was held from 10 October 2004 to 12 February 2005, during which 30 514 individuals aged from 12–75 were interviewed by telephone using the computer-assisted telephone interviewing (CATI) system.12
The questions specific to tobacco cover such areas as consumption frequency, the number of cigarettes smoked and the type of tobacco used, according to the age and sex of the respondents.
The method used for estimating cross-border purchases and the smuggling of tobacco involve comparing the recorded sales of tobacco and the volume of cigarettes and hand-rolled tobacco declared as being consumed by individuals, on a department by department basis. In order to obtain this latter figure, the following estimation method was used. Firstly, in order to identify the smoking population, we multiplied the population (according to age and sex and on a departmental basis) by the prevalence of smokers for each age and sex category. Secondly, the “smoking population” thus obtained was multiplied by the number of cigarettes declared as being smoked. It should be noted that the declarations made concerning the number of cigarettes smoked have been divided into intervals: from 1–5 cigarettes, from 6–10, from 16–20, and 20+. We then considered three consumption hypotheses: a low assumption based on the lower limits of the band, an average assumption, and a high assumption based on the upper limits of the band. Additionally, we arbitrarily took the maximum daily cigarette consumption figure to be 25 cigarettes, with individuals having the option of replying “more than 20” for the last band; this almost certainly underestimates the true consumption of “heavy” smokers.
Data concerning tobacco sales (manufactured and hand-rolled cigarettes) and demographic data were available on a department by department basis, and all calculations were also carried out on a departmental basis. This made it possible to obtain results for the various geographical regions and consequently to highlight those areas in which tobacco sales and declared tobacco consumption did not match.
Study 2 results
Table 1 shows the results of the comparison between registered tobacco sales and declared tobacco consumption for the years 2000 and 2005, ie, before and after the major tax increases of October 2003 and January 2004.
For the year 2000, we can see that all estimates are negative, which may be due to people understating their tobacco consumption.13 We will discuss this particular point in more detail later.
Despite this potential tendency to understate consumption, in 2005, based on the average and high assumptions the French population declared that they smoke more tobacco than they actually purchase: this being between 12 000 and 13 000 tonnes more, equal to 15.6 billion cigarettes (if we assume that one manufactured cigarette = one hand-rolled cigarette = 0.8 g),8 9 representing slightly less than one cigarette per day, per adult in 2005 or around 20% of the legal market (cigarettes and hand-rolled tobacco).
Following these estimates, it is possible to see how these differences between sales and consumption are broken down geographically throughout France in fig 3, the scale for which has been chosen arbitrarily.
It is interesting to note from fig 3 that the areas in which declared consumption and sales of tobacco matched were the heavily populated areas (Paris for example) or tourist regions (south-eastern France). We also noted a number of differences compared to fig 2, chiefly concerning the coastal regions in western France and the eastern-central area. For the first area, the differences between figs 2 and 3 can be explained by the fact that this is a port area (the port of Saint-Nazaire), and that cigarette smuggling could have already been well established there long before 1999. The same applies for the Lyon area (east-central France), which is a region through which very large quantities of merchandise pass in transit (by rail and road).
STUDY 3: HOUSEHOLD WASTE AS AN INDICATOR OF THE COUNTRY OF ORIGIN OF FOREIGN TOBACCO
Context of the collection
Studies into the smuggling and cross-border purchasing of tobacco using household waste as an indicator are rare. In Germany, the tobacco industry carried out a collection of cigarette packs from dustbins in some 20 different towns for a given month. According to an anonymous reviewer, around 10 000 packs were collected. In France, a similar study has been carried out in 20 towns: 2000 packs were picked up from the ground in these towns.
The study presented here is based on a 2-day collection that was carried out on 1–2 November 2005 and on 4–5 December 2006 by Syctom (Paris, France), a company that specialises in waste collection. The Syctom plant is located in Nanterre, in the Hauts de Seine area to the west of Paris. Due to this location, in relation to the details outlined earlier, this study suffers from a lack of representation and must be considered as exploratory.
After the collection of cigarette packs from among the rubbish, the identification of the geographical origin of these packs was performed based on several indicators: the brand, the language, the heath warning messages (if any), or further investigations.
Results of study 3
In 2005, 570 packs were collected. Of these 570 cigarette packs, 106 (18.6%) were of foreign origin or purchased in duty-free shops, or included no details of their nationality. Spanish packs accounted for 20.75% of the foreign packs, with 13.2% being from Belguim or Luxembourg, and 12.26% of unknown nationality.
In our collection from 2006, the number of foreign packs decreased. Out of a total of 731 packs collected, 113 were of foreign or unknown nationality (15.5%). Once again, Spanish packs were the most numerous, accounting for 26.5% of the foreign packs.
During our collections, it became obvious that certain packs of different nationalities could clearly be the result of purchases made abroad during holidays or due to the presence of foreign tourists in France. For example, we found packs from China, the USA, South Korea and Eastern Europe (Poland, Romania, etc.).
If we consider that all of the packs from Spain, Belgium, Luxembourg, Portugal and Italy are the result of cross-border purchases (legal and illegal), this accounts for 10% of cigarette purchases in France and 6.6% in 2006. While packs of unknown nationality accounted for 4% of non-French packs in 2005, they accounted for 26.5% in 2006.
Finally, it should be noted that the brand encountered most frequently among the non-French packs was Marlboro, followed by Philip Morris.
The volumes of tobacco derived from cross-border shopping and/or smuggling can be assessed at somewhere between 9000 and 10 000 tonnes in 2006. The same quantities were assessed based on various methods at 8300 tonnes in 2004 and between 9000 and 12 000 tonnes in 2005. The level of change in these purchases of untaxed tobacco products seems to be stabilising. However, as for all analyses examining illegal behaviour or the underground economy, the methods used need to be discussed in order to improve their effectiveness.
The simulation (study 1) carried out concerning tobacco sales is simple and based on the assumption that the department having witnessed the smallest falls in tobacco sales is representative of the nation as a whole. If instead of considering a single benchmark department we use a group of departments, or an average of the falls in tobacco sales, the estimates are lower. For 2004, the estimation based on a group of departments shows that cross-border purchases represented 6% of registered sales14 whereas our figure is between 14 and 17%. We have used the growth rate for the department experiencing the lowest fall in sales, and not a group of departments as has been done elsewhere, in order to gain a comprehensive overview of the entire phenomenon of smuggling or cross-border purchases (whether legal or illegal). Indeed, considering a group of departments in the centre of France, for example, removes any idea that these departments may be victims of smuggling and illegal cross-border purchases. In other words, distance from the borders (transport costs) does not constitute an argument against our method, as it can still be lucrative to travel several hundred km with more tobacco than the law allows a person to carry, and to resell this on the black market. However, it must nevertheless be recognised that the specification of the benchmark department(s) is also something open to discussion.
The second estimation method based on the declared consumption of tobacco makes it possible to reconstitute the volumes of tobacco likely consumed by the French population. Generally, statements of tobacco use carried out in surveys of the population at large tend to underestimate actual tobacco consumption.13 This level of “understatement” is measured using the same method that we have already used. However, two phenomena can constitute doubt factors where understatements are concerned: firstly, we have noted that the level of understatement is higher in French tourist areas; secondly, for the year 2000 understatement is higher in those areas close to the UK, where the difference in tobacco prices between the two countries is very high.15 In our case, we found a high level of overstatement and attributed this to purchases of untaxed tobacco following a comparison with registered sales. As a result of this tendency to understate, we can assume that our assessments underestimate the purchases of untaxed tobacco. Based on the arguments presented above, it is nevertheless difficult to be categorical concerning this point, as levels of understatement may vary over time.
Finally, the third method could have the advantage of adding greater qualitative depth to the purpose of our analysis, but this study is not representative at a national level. The location of the waste-sorting centre has an important role to play. If we had chosen a recycling plant close to the Spanish border, for example, it is reasonable to assume that we would have found more Spanish cigarette packs. In our case, carrying out collections in the Paris suburbs may lead to the results being affected by the fact that Paris is a popular tourist destination. Despite this, however, if collections were carried out across the whole of France this method would enable us to have a qualitative overview of the smuggling and cross-border purchasing of tobacco. The waste sciences can possibly help us to improve the effectiveness of this type of qualitative analysis.
What this paper adds
For the first time, cross-border tobacco purchases and tobacco smuggling are evaluated for France. To do so, two methods are used for quantitative estimates, while a third and new method tries to give a qualitative overview of the foreign tobacco present in France; namely its geographical origin and the cigarette brands involved.
Regardless of the methods used, the fact nevertheless remains that it is impossible to discriminate between smuggled goods, legal cross-border purchases and illegal cross-border purchases. The only possible distinction that can be made thanks to the third method is between counterfeit packs and others.
To conclude, we can say with some confidence that France does not appear to be the victim of tobacco smuggling on an excessive scale but seems to suffer to a much higher degree from the cross-border purchasing of cigarettes, chiefly from Spain, Belgium and Luxembourg. As tax avoidance due to these cross-border purchases can adversely affect the financing of the state healthcare system, and with the aim of discouraging individuals from making such cross-border purchases, an (upwards) harmonisation of national policies on the taxation of tobacco products needs to be envisaged by the European Union for at least groups of countries geographically close to one another and having roughly the same economic living standards. The control of illegal tobacco products is something that can only be carried out on a collective basis.16
We are very grateful to Claude Got and Hélène Martineau for their help with the waste collection centre project. We would also like to thank Syctom, Fabien Cambon and Christine Mancheron and their staff for their assistance. Comments from the editors and three anonymous referees enabled us to significantly improve the quality of the paper, and we would therefore like to thank them too.
Competing interests: None declared.