September 27, 2010 - The European Commission signed a co-operation agreement with Imperial Tobacco Limited (ITL) on Monday (27 September) under which the tobacco company will pay some €200 million (268,816,088 USD) over the next 20 years to the EU and member states to help combat cigarette smuggling.
"Despite our very best efforts, the EU cannot eliminate contraband and counterfeit cigarettes on our own. We rely on the support of our international partners and we rely on co-operation with industry," EU taxation commissioner Algirdas Semeta said at a press conference.
You can't have a successful tobacco control program until the flow of illegal (illicit, contraband, smuggled, black market) tobacco can be eliminated.. (Tobaccowatch.org)
The agreement with Imperial is the fourth such agreement with a big tobacco company that the EU has signed. A deal between the EU and Philip Morris was signed in 2004, with Japan Tobacco International in 2007 and British American Tobacco in July 2010. Each company agreed to partly co-finance the anti-smuggling fight.
The United Kingdom has joined the 26 other EU member states and the European Community as a signatory to the 2004 anti-contraband and anti-counterfeit agreement with Philip Morris International (PMI) and the 2007 co-operation agreement with Japan Tobacco International (JTI), the European Commission said on April 21 2009. (All EU states sign up against illicit tobacco trade..)
Mr Semeta said the payments from tobacco companies to the member states are "substantial", with the last two agreements alone counting for more than half a billion euros over the next twenty years. "These are not penalties, not another way for manufacturers to buy their way out of any responsibility," Mr Semeta added.
ITL has agreed to pay €207 million (280,815,973.57 USD) o fund anti-smuggling trade initiatives in the member states. The company also agreed to share its intelligence with the authorities, to strengthen its review process for selecting and monitoring customers, and to introduce tracking and tracing mechanisms on its products. The company will have to pay in the event of future seizures – above a certain volume on the EU market - of its product to compensate the member state for lost taxes and duties and other costs.
Alison Cooper, Imperial Tobacco's chief executive: "We initiated this co-operation agreement because we see this is an area for investment for Imperial. Illicit trade benefits nobody, it does not benefit our customers, it does not benefit governments, but it also knocks on the Imperial as well and our business." said,
The commission has estimated that counterfeit and smuggled tobacco products cost the EU and national governments up to €10 billion annually in unpaid taxes, making the EU budget short of around 10 percent of that sum.
A British health campaigning charity, Action on Smoking and Health (ASH), said in a statement that although the top four international tobacco companies have signed anti-smuggling agreements, there remains a European wide problem with the illicit trade in other companies' products. According to ASH, Imperial itself has in the past been severely criticised for its links to tobacco smuggling.
"Imperial Tobacco has an appalling past record in allowing its products to be smuggled into the United Kingdom (UK), and should have been called to account for its activities long before now. At last it is being made to pay for its past scandalous behaviour," said Deborah Arnott, director of ASH.
The EU plans to update its overall tobacco policy, which dates back to 2001, in the coming months. Problems to be addressed include the use of new tobacco and nicotine products such as electronic cigarettes, use of pictorial warnings on packaging and use of flavours in tobacco products.
EU - fighting against cigarette smuggling but a WHO solution may be in site..
References: EU teams up with Imperial Tobacco to fight cigarette smuggling, MATEJ HRUSKA, euobserver.com, 9/27/2010; European Commission and Imperial Tobacco sign agreement to combat illicit trade in tobacco, Europa.eu, 9/27/2010.