Jamaica - government collecting less tax from cigarette sales because of illicit trade..

April 20, 2010 - CARRERAS Limited, the major distributor of cigarettes in Jamaica, is set to make tax contributions of around four per cent (J$11 billion, one J$=0.0113572 USD) of the $287 billion sought in this year's national budget from taxes. The Government is looking for gross revenues of J$326.3 billion. The Carreras contribution may be affected if the earnings of the company are further reduced by the illicit trade in cigarette products in Jamaica, says Michael Bernard, managing director of the company.

Carreras, a subsidiary of British American Tobacco Company (BAT), is the exclusive local distributor of cigarette brands Dunhill, Matterhorn, Craven A and Rothmans, with approximately 99 percent of market share. Musson Jamaica, which distributes Marlboro and Green brands, accounts for the remaining one percent of the market.

The illicit trade in counterfeit and contraband cigarettes is costing the Government millions of dollars in revenue, both at the ports and in the retail market where illegal traders circumvent the Special Consumption Tax (SCT) of $10.50 per stick and 17.5 per cent General Consumption tax charged on the products sold for approximately $35 each.

Cigarettes such as Kool, Benson & Hedges, Newport and More are illegally sold in Jamaica. They violate trademerk rights because no company is licensed to distribute them in the country. Traders also avoid taxes at the ports.

Last year, Carreras reported a contribution of J$9 billion to Government coffers as a result of the taxes charged on the tobacco products. However, with the increasing trade in contraband and counterfeit products, all of which evade the tax net, Brown said that Carreras' revenues will not be the only income stream affected. "The fundamental concern is the revenues the Government receives from the SCT. The greater the emergence and presence of the illicit trade in the market, the less the Government is going to receive from us," he said.

Reference: Illicit trade in cigarettes hurting Carreras by ALICIA ROACHE (roachea@jamaicaobserver.com), Jamaica Observer, 4/16/2010.