Govt will lose K952mil to illicit cigarette trade: Report

By DALE LUMA
GOVERNMENT will lose K952 million in tax revenue due to illicit cigarette trading this year, according to a report.
The report Illicit Tobacco in PNG was commissioned by the PNG Manufacturers Council and produced based of a study by consulting firm FTI Consulting.
Council chief executive officer Chey Scovell, in presenting the report to Prime Minister James Marape yesterday, said the country continued to face issues with the trading of illicit products.
“Economic modelling reveals that illicit cigarettes has a significant impact on government revenue and the scale of losses increases significantly over time,” Scovell said.
“This our year alone, our government will lose K952 million in revenue and should rise by K5.49 billion per annum by 2030 if this government and future governments continue to be complacent with trading of illicit products.
“Illicit tobacco has a significant impact on national and regional economies across all key macroeconomic indicators.
“At our national level, we see that the illicit trade will erode real GDP (gross domestic product) by as much as 1.35 per cent and total national welfare by 2.28 per cent.”
Scovell said the increase in penalties on offenders had not had a significant impact on illicit tobacco trading due to intelligence on repeat offenders.
He said the trade was so lucrative for offending businesses that they were prepared to risk prosecution as few were punished effectively.
Among a number of recommendations to the government, the council strongly recommended establishing an independent illicit taskforce to drive a more comprehensive strategy at combating the illicit tobacco trade as well as a tax excise freeze at a minimum of 36 months.
Last year the report estimated the tobacco market in PNG had increased to about 5.5 billion sticks, representing a 19 per cent increase, according to Scovell.
“With the largest increase in the cigarette market, that portion has increased by 29.4 per cent.
“In the past few years, we have seen the tobacco market evolve, having spent decades with just one manufacturer, we now have five with a few more in the pipeline.
“Some of these new operators now hold market shares of around 10 per cent.”
Prime Minister James Marape said the government would take the recommendations into consideration.