New study: Illicit trade in cigarettes on the rise in Uganda

| THE INDEPENDENT | A new study has found that 23% of cigarettes sold in Uganda appear to be illicit, indicating unfair competition to the established tobacco products dealers and loss of revenue to government.

The findings based on the BAT Uganda’s approved study that was carried out in the second half of last year by Kantar, means there was a 54.5% increase in illicit trade in cigarettes in country compared to September 2020 when the number stood at 15.4%.

The term illicit, according to BATU, refers to any cigarette pack, which based on its physical features, appears to be non-compliant with applicable legal requirements for sale in the country.

BATU Board Chairperson, Elly Karuhanga, said on June.28 that the biggest concern to the tobacco industry relates to tax-evaded cigarettes bearing fake stamps or no tax stamps at all.

“These products also do not bear the prescribed graphic health warnings on their packaging, in contravention with the Tobacco Control Regulation, 2019,” he said.

Karuhanga said the study reveals that more than half of illicit cigarettes (51%) on the market appear to be manufactured in Uganda based on the park markings with the rest being smuggled into the country from other countries. He said eastern and northern Uganda had the highest prevalence of the illicit cigarettes on the market.

“Similar research conducted in Kenya by Kantar also found that Uganda is a major source of illicit cigarettes in neighboring countries, with 93% of illicit cigarettes found in Kenya believed to originate from Uganda,” he said.

“According to the Kantar report, these products are typically branded Supermatch, though report makes no claim as to the actual manufacturer of each pack and bases its findings solely on the observable features of the pack.”

Last year, the cigarette firm recorded a sharp drop in net profit from Shs 19.9billion in 2020 to Shs 10.2billion citing slow economic recovery and increased incidences of trade in illicit cigarettes. The company said the government losses an estimates Shs30billion annually to illegal tobacco trade.

Karuhanga said BATUs staff and research visits by partner’s reveals that the sale of illicit cigarettes is ongoing in the full glare of law enforcement officers.

“…it is inexplicable and totally unacceptable that such criminal activity is allowed to thrive in a country with fully fledged regulatory frameworks,” he said adding that a failure to enforce law against illicit trade in the country is not only an affront on the socio-economic welfare of Ugandans but also a direct threat to the economy and security of a nation.

He said the vice is putting legitimate Ugandan traders and businesses such as BATU are under threat due to the loss of businesses to criminal tobacco gangs.

He said while Uganda Revenue Authority has put in efforts including introduction of digital tax stamps system, amore need to be done through a multipronged approach.

Karuhanga said there’s need for a full enforcement of tobacco product and packing regulations countrywide, proper implementation of Digital Tax Stamps and strong enforcement, greater information in sharing excise tax harmonization with in the East African Community member states and putting in place stringent sanctions to act as a deterrent, in form of custodial sentences and forfeiture of factory equipment, real estate as well as moveable and non-moveable assets arising from illicit trade.

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