ECONOMYNEXT – Sri Lanka’s market for illegal and smuggled cigarettes, a consequence of excessive-high taxation and import duties legal products, may be lower than claimed by the tobacco industry due to questionable methodology used to come up with estimates, a researcher has warned.
In foreign countries, anti-tobacco activists have shown that cigarette firms have used questionable tactics and methologies in their research studies to over-estimate illegal markets in a bid to stampede policy makers.
“The Tobacco Control Research Group at the University of Bath, UK has shown how tobacco companies exaggerate the extent of illicit tobacco by commissioning studies whose methodology and validity are unclear and misquoting data in the media,” Harini Weerasekera, a Research Officer at the Institute of Policy Studies of Sri Lanka wrote.
“A 2019 study conducted in Colombia found that the tobacco industry’s estimate of the illicit cigarette market is significantly exaggerated at 18% when illicit cigarettes represented only 6.4% of total cigarette consumption in 2017.”
“The story is not too different here in Sri Lanka. Various aspects of illicit tobacco trade are highlighted in local media, quoting vague sources and misrepresented official statistics.”
A 2017 study of disposed cigarette packs and butts found that 15 percent of butts and 10 percent of packs came from the illicit market.
“However, both estimates are questionable,” Weerasekera said. “The study relied on tobacco company expertise to distinguish formal butts from illicit butts.
“Further, the packs for the study were collected in high tourist density districts, potentially creating an upward bias in the results. As such, the estimate of Rs. 80 billion loss in tax revenue to the government arrived at by this study based on the abovementioned figures is unreliable.”
A regular survey by the Alcohol and Drug Information center, an anti-tobacco activist group had found that beedi, a type of rude cigarette made with tobacco rolled in a leaf has declined over time, she said.
The ADIC SPOT Survey had shown that as a percentage of current smokers, the share of beedi users has declined from 11 percent in 2013 to 5.4 percent in 2017.
De-Glamorize vs Coercion
Unlike other anti-tobacco activists who use the force of a coercive state to push up taxes, violating the most basic principle of taxation established over millennia in South Asian civilizations, to indulge in social engineering ADIC also uses non-coercive tactics worthy of a free society, a volunteer familiar with the work of the agency said.
ADIC has done effective grassroots activism, to de-glamorize tobacco smoking in the best free society tradition (cigarette biwwuma gandayi – you smell bad after smoking cigarettes) as well as multiple programs effectively turning youth and school children away from tobacco.
ADIC has also picked holes in claims made by the tobacco industry in the past, including employment numbers.
Other activists abroad have also pointed to erectile dysfunction as a reason to stop smoking.
Meanwhile Weerasekera pointed out that stories about beedi consumption tend to spike before budgets.
“A study of Google search engine trends suggest that there were spikes (red circles) in the search term ‘beedi’ in the months preceding budget speeches(orange circles) in 2014, 2016, and 2019 (2015 had an interim budget and the 2018 budget reading was pushed to March 2019),” she said.
“This might suggest that stories are being placed intentionally, to sway policymakers away from tax hikes on cigarettes in upcoming budgets.”
However, in recent years Sri Lanka has jacked up import taxes of beedi-rolling leaf steeply, triggering another illegal industry in leaf smuggling, making it less easy to estimate domestic production compared to before.
There is anecdotal evidence however that a switch is taking place to beedi, among construction workers, day labourers and even among those in formal employment such as security guards, though there is no independent research to show the extent of the switch.
Beedi and the cheapest cigarette brands do not have a filter.
“I think I stopped smoking cigarettes about three years ago,” Aruna, a security guard said. “I can buy a mitiya (20 sticks) of beedi for 120 rupees. It is three for 20 rupees. A Gold Leaf I think is more than 60 rupees. I think it is the cheaper one as well, I do not remember. I don’t buy it anymore.
“Very occasionally I buy a Capstan (the cheapest legal cigarette brand).”
There is also anecdotal to suggest that among higher income brackets and a certain social strata, cigarette consumption falls with higher taxes as beedi is not considered hip. Whether they go for alternative recreation is not known.
The cost of a person smoking 10 premium brand cigarettes a day is now about 650 rupees.
The Ceylon Tobacco Company itself has seen long term decline in sales amid marketing and advertising restrictions, de-glamorization activities by activists, education about health effects, as well as tax hikes.
A Defective Product
Critics consider cigarettes to be a defective product, where nicotine the active ingredient, is delivered along with a number of carcinogenic chemicals. Smoking is also shown to cause circulatory and lung diseases.
There is no known ‘safe level’ of consumption of cigarettes and along with arms is among two products that can kill the consumer even if used as directed by the manufacturer.
Nicotine is also a highly addictive substance, which tends to reduce free choice.
Slippery Slope of the Threat of Violence
However replacing reason and advocacy, with coercive taxation to achieve the vicarious objectives of interventionist third parties, is a slippery slope, critics have warned.
Unreasonable taxes, whether import duties or domestic provide incentives for social degeneration and disrespect for the law.
Already taxation, which is being enforced by the threat of violence of the state is being mis-used by oriented groups of interventionists on sugar consumers, despite the patently obvious that all interventionist taxes give results by working on the least affluent in society.
Fat is likely to be the next target of interventionists.
The mis-use of taxes to cause pain to consumer, whether on imports or domestic goods is that it de-sensitizes the society to the use of threat of violence and brutality of the state, liberal philosophers who saw it happen in other countries have warned.
Economist and philosopher Ludwig von Mises has said that the interventionism of Socialpolitic, in late 19th century Germany (and later the Marxist-socialist Weimar Republic) which he called estatism, laid a foundation for Germany society to enact discriminatory interventionist policies against minorities.
“Governments are never liberal from inclination,” von Mises pointed out. “It is in the nature of the men handling the apparatus of compulsion and coercion to overrate its power to work, and to strive at subduing all spheres of human life to its immediate influence.
“Etatism is the occupational disease of rulers, warriors, and civil servants. Governments become liberal only when forced to by the citizens.” (Colombo/Oct16/2019-sb)