Latvia - are smugglers the leaders in the tobacco market??

Latvia - coat-of-arms..
November 15, 2010 - Back in September 2009 we reported that British American Tobacco (BAT) Latvia will shut down its production plant in Riga this week and lay off 223 employees. The company says this is because of excise tax hikes in the last two years that has led to a flourishing of the black market. (Latvia - BAT shuts down tobacco production plant in Riga..)

According to a Baltic Business Daily story quoting a BNS (Baltic News Service) interview with British American Tobacco’s general director in the Baltic states, Peter Halacz. Smugglers are the leaders on the Latvian tobacco market,

Halacz: "You know that 50 per cent of the Latvian cigarettes market is contraband cigarettes. Thus, the absolute market leader is organized crime. Therefore, the legal tobacco industry is facing a serious pressure."

Halacz said that the legal tobacco industry found it hard to ensure the profitability of its business because contraband cigarettes were offered on the market for prices 50 percent below the prices of legal cigarettes. To combat the illicit trade, tobacco companies had to offer other tobacco products, such as cigarillos and smoking tobacco, which attracted lower excise taxes than did cigarettes.

And this raised the danger that, overall, tobacco excise revenues might fall, which could tempt the government into raising excise rates and providing further encouragement to the illicit trade.

Recently, Latvian authorities have prevented 11 attempts for cigarette smuggling, Delphi agency reported. A total of 42,000 pieces of cigarettes with Russian and Belarusian excise labels have been seized. Experts say 50% of the Latvian market of tobacco products is occupied by smuggled cigarettes. Contraband tobacco is about 50% cheaper than those sold legally. (Latvian authorities prevent 11 attempts of cigarettes smuggling, FOCUS News Agency, 11/11/2010)

Bachelor’s Thesis - Social Costs of Smoking in Latvia, Authors: Arturs Geisari, Artjoms Sarafejevs, Stockholm School of Economics in Riga, May 2010.

Reference: llicit traders in number one spot in Latvia, Tobacco Reporter. 11/15/2010.
(contraband, smuggling, illegal, illicit, black market)