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NUS Assoc Prof highlights out alleged tactics by big tobacco companies to thwart tax hikes

In a recent ST opinion piece, Assoc Prof van der Eijk from NUS shed light on tobacco companies’ tactics in exaggerating a ‘rampant’ illicit cigarette and vaping market in Singapore.

She criticised industry-backed research inflating figures to thwart tobacco tax hikes that could harm the tobacco sales, falsely linking taxes to illicit trade.

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SINGAPORE: Dr Yvette van der Eijk, an assistant professor at the NUS Saw Swee Hock School of Public Health, has underscored the tactics employed by tobacco companies in cultivating the perception of a “rampant” illicit market for cigarettes and vaping within Singapore.

In an opinion piece featured in the Singapore state media the Straits Times, Assoc Prof van der Eijk outlined the inflation of estimates concerning the illicit cigarette trade, elucidating how tobacco corporations leverage these inflated figures to dissuade governments from elevating tobacco taxes.

Published on Monday (20 Nov), Assoc Prof van der Eijk’s article delved into Singapore’s illicit market for vaping and tobacco products.

While the number of individuals caught vaping in Singapore each year has surged from 1,266 in 2020 to 4,916 in 2022, there has also been a reported uptick in illicit cigarette trade offenses—from 4,963 in 2021 to 6,300 in the first half of 2023.

Nevertheless, these figures paled in comparison to pre-COVID-19 years, notably 21,132 in 2018 and 19,266 in 2019.

During the 2020 pandemic-induced circuit breaker in Singapore aimed at curbing COVID-19 spread, the numbers dropped significantly to 6,690.

Assoc Prof van der Eijk highlighted that the recent apparent surge in illicit cigarette trade is more of a post-pandemic rebound following the reopening of borders, rather than a substantial escalation.

She said the illicit cigarette market in Singapore accounts for less than 4 per cent of the total cigarette market and has progressively diminished over time due to improved controls over illicit trade.

“The vape market is also quite small. While 4,916 people caught vaping sounds like a lot, and it certainly is more than before, in a city of around six million inhabitants it comprises only 0.08 per cent of the total population, “she asserted, shedding light on the disproportion between perception and reality regarding the prevalence of illicit markets for cigarettes and vaping in Singapore.

Assoc Prof van der Eijk, who is also a consultant for the Tobacco Control Programme, is well-known for her advocacy in supporting tobacco control initiatives in Singapore.

She firmly believes in a generational phase-out of tobacco sales, deeming it feasible in Singapore. She also wants to see the minimum legal age to purchase tobacco raised to 25 by 2025.

Inflation in illicit cigarette trade figures

Assoc Prof van der Eijk further dissecting the issue, she said in fact estimates of illicit cigarette trade are difficult to find, and frankly highlighted that “most estimates of illicit cigarette trade are inflated”.

She pointed out that a significant portion of research in this domain is financially supported by the tobacco industry, engaging entities such as the International Tax and Investment Centre (ITIC), Oxford Economics, and KPMG to craft reports that consistently exaggerate the scale of illicit markets.

“These reports, however, tend to grossly overestimate the size of illicit markets, and their methods have been widely criticised. Industry-independent academic studies, with more rigorous and transparent methods, came up with far smaller estimates.”

Citing an example, Assoc Prof van der Eijk referenced a report by ITIC for Philip Morris International, which overestimated the illicit cigarette market in Hong Kong at 36 percent, whereas the reality was closer to 12 percent.

Furthermore, she cited studies conducted across various countries in Asia, Europe, and Latin America, which revealed a recurring trend: reports funded by the tobacco industry consistently magnified the sizes of illicit cigarette markets when compared to rigorously conducted independent academic studies.

“Tobacco companies then use these inflated figures to deter governments from raising tobacco taxes by arguing that taxes are the reason illicit trade occurs, ” said Assoc Prof van der Eijk.

Alleged link between illicit cigarette trade and corruption/criminality

She pointed out that the tobacco industry knows that taxes are very effective at deterring smoking.

In Singapore, the government increased the excise duty on all tobacco products by 15% on February 14, 2023.

With this increase, consumers will have to pay 49.1 cents per stick for cigarette, up from the previous 42.7 cents per stick.

For example, a 20-stick packet of Marlboro cigarettes is now expected to be sold at $15.52, up from the previous $14.

This tax increase is intended to discourage tobacco consumption and reduce smoking prevalence.

In their own internal documents, tobacco companies identified tobacco taxes in Singapore as “a threat to the profitability of the industry” and had developed elaborate strategies to undermine them.

One such strategy involved asserting that taxes were the cause of illicit trade.

Assoc Prof van der Eijk expanded on this point, highlighting that the occurrence of illicit cigarette trade is closely linked to levels of corruption and criminal activity, rather than the imposition of tobacco taxes.

“This explains why in Singapore, which has low levels of corruption and criminality, illicit cigarette trade has decreased over the years and remained low even as taxes and other tobacco measures have become more stringent.”

She remarked on the contradictory stance taken by British American Tobacco (BAT), for instance, which publicly emphasizes that “combating illicit trade is a priority to safeguard our combustibles business”.

BAT’s illegal tobacco sales to North Korea via Singapore-based subsidiary result in US$629 million in fines

However, internal documents from the tobacco industry shed light on BAT’s endeavours to penetrate the Vietnamese market during the 1990s when Vietnam had imposed an import ban on cigarettes.

BAT circumvented these restrictions by orchestrating illegal smuggling operations from their manufacturing facilities in Cambodia into Vietnam, effectively stimulating demand for their brands.

This enabled BAT to gain an upper hand in negotiations for a joint venture with Vinataba, Vietnam’s state-owned tobacco industry which previously held a monopoly over the market.

Upon gaining access to Vietnam, BAT controlled the pricing of both locally produced and smuggled cigarettes, facilitating the transition from illicit trade to legal sales.

Assoc Prof van der Eijk pointed out that further details from documents revealed BAT’s smuggling of its brands into other Southeast Asian countries through its distribution partner based in Singapore, Singapura United Tobacco.

BAT allegedly masked its illegal trade by exploiting legal trade channels, labeling smuggled cigarettes as “partial duty-paid” or “duty-free” while using coded terms like “general trade” or “GT” in their documentation.

More recently, in April, BAT faced penalties exceeding US$600 million for unlawfully selling tobacco to North Korea through its Singapore-based subsidiary, BAT Marketing Singapore (BATMS).

To conceal their connection to North Korea, payments from North Korea were routed through shell companies to a third party based in Singapore.

Singapore government urged to stand firm against the legalization of vaping

Furthermore, Assoc Prof van der Eijk urged Singapore to stand firm and avoid repeating similar mistakes, advocating against the legalization of vaping, emphasizing the potential adverse effects it could have on public health, particularly among the youth.

She emphasized the danger of exposure to content glamorizing vaping, which could mislead young individuals into perceiving vaping as a norm, despite it being predominantly overseas content or limited to a small segment of Singapore’s population.

She pointed out the mounting pressure from the industry to legalize vaping, citing a growing sentiment in Singapore that suggests legalizing it for better regulation if an illicit market already exists.

However, she cautioned against this approach, referencing New Zealand’s example where regulated legality resulted in almost one in five teenagers aged 14 or 15 regularly vaping.

 “With a legal market, Singapore would have a far worse problem.”

“Imagine how many more teens would be vaping if vapes were displayed in every mamak shop near a school, and if people were vaping freely in the streets.”

“Just like in Vietnam and in many other countries where the tobacco transnationals have pried open markets, smoking rates have skyrocketed, with devastating impacts on public health, ” Assoc Prof van der Eijk added.

In 2018, Public Health England’s study revealed that vaping is 95% less harmful than traditional cigarette smoking and aids approximately 20,000 individuals in quitting smoking annually.

Meanwhile, Singapore enforced a ban on the sale of vaping products the same year. The country strictly prohibits the importation and sale of e-cigarettes and vapes as part of a comprehensive ban on imitation tobacco products.

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