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• Orchid & Dirty Ashtray Awards
• Accelerating Action: Charting the Course for Effective Implementation of the WHO Protocol on Tobacco Trade at MOP3
  
• Track and Trace (Article 8): Industry involvement in Track and Trace
• Taxation and Illicit Trade: A strategic look at gaps and needs in resources and training, as well as global sources of resource and training that Parties can access.
  

Please watch this space for Orchid and Ashtray updates during MOP3.

Orchid Award

DIRTY ASHTRAY

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Accelerating Action: Charting the Course for Effective Implementation of the Protocol at MOP3

It has been five long years since MOP met in person and in those years the need for swift implementation of the WHO Protocol to Eliminate Illicit Trade in Tobacco Products has only become more pressing. Every hour of every day we are here will be needed for constructive and productive discussion. We need to spend the next four days focussing on action and issues that will help with effective and efficient implementation of the Protocol.

A lot of effort has gone into getting the Protocol off its feet over the last five years, but there is still so much more work that needs to be done. The MOP3 includes an agenda with some scope for technical discussions which need to take place at a key moment of growth for the Protocol and given the functionality of discussions with a much smaller group of Parties. Accordingly, Committee A will need to discuss the report of the Working Group on tracking and tracing, the proposed road map, timelines and steps to conduct evidence-based research on articles 6.5 and 13.2, as well as the improvements to the reporting system of the Protocol. Committee B will be discussing progress since 2020, Assessed Contributions, changes to the proposed MOP Investment Fund, and the workplan and budget for the upcoming biennium.

Implementation of key measures of the Protocol, such as licensing, tracking and tracing, due diligence and free zones is too low. Parties can take this opportunity to discuss how to most effectively mobilize domestic resources in order to reap the fiscal and public health benefits of the Protocol.

We have a lot of important work ahead of us at MOP3 to ensure effective implementation of the Protocol and that it moves in the right direction. It will be particularly important for us to use our time wisely and to approach discussions and negotiations with a spirit of collaboration. While no one expects the agenda of MOP3, by itself, to put an immediate end to illicit trade in tobacco products, we should all be aware of the heavy responsibility on our collective shoulders, so let’s get to work!

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Track and Trace (Article 8): Industry involvement in Track and Trace

This year’s MOP agenda includes the report by the working group on tracking and tracing systems, including the global information-sharing focal point (GISP) (Article 8), which puts forward an interim solution for the GISP, as Parties continue to work on implementing their own tracking and tracing systems. While each Party has their own experiences of working to implement tobacco tracking and tracing, a theme throughout many of these is tobacco industry interference.

Such interference can be traced back to 2010, when a technology developed and patented by PMI, named Codentify, was licensed for free to its main competitors. Internal tobacco industry documents outline the wider role of Codentify within the industry’s efforts to influence policy. In short, the industry worked to influence the Protocol negotiations before developing a plan to gain control of national-level track and trace systems, with Codentify being the key means for achieving this.

Codentify, while marketed by the industry as a tracking and tracing system, has received widespread criticism for failing to securely track and trace products, with a particular issue being the system’s vulnerability to code recycling. Despite such concerns and the industry’s involvement in the technology, which does not align with the Protocol’s requirement that Parties’ track and trace obligations “shall not be performed by or delegated to the tobacco industry”, it has previously been claimed that the technology has been utilised in over 50-100 countries worldwide.

Following growing awareness of Codentify’s links to the industry (these were not immediately clear due to the major transnational tobacco companies establishing a front group, the Digital Coding and Tracking Association, to promote the system), in 2016, the technology was sold to Inexto – a company described in press at the time as being completely independent from PMI. However, leaked Inexto meeting minutes from 2017 would call this claim into question and, to this day, multiple members of Inexto’s senior leadership continue to be former tobacco industry employees, some of whom are named in patents for the Codentify technology. As such, use of Inexto’s current technology raises similar concerns around Protocol compliance as Codentify did.

Despite this, court documents from Inexto claim that the company is a leading provider of track and trace software, with it having been utilised in over 35 countries. This is clearly a concern given that many Parties to the Protocol are still in the process of implementing their own track and trace systems.

Going forward, it is crucial that Parties working to implement tracking and tracing systems are aware of the industry’s efforts to undermine the process and that this can happen under the guise of third-parties that purport to be independent. When choosing a system, Parties should consider which potential solutions may have been industry-developed and that any agreement with a provider is transparent enough to ensure that control of the system will lie with the Party and its authorities, rather than with the industry or its affiliates.

Author:

Dr. Allen Gallagher, Research Fellow, Tobacco Control Research Group (TCRG), University of Bath, UK

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Taxation and Illicit Trade: A strategic look at gaps and needs in resources and training, as well as global sources of resource and training that Parties can access

Effects of efficient tobacco taxation

Increasing excise taxes on tobacco to reduce its affordability, lowers its consumption, improves public health, increases tobacco tax revenue, and reduces the economic burden associated with tobacco use.(1-5)

For tobacco taxes to be efficient, they should be simple, and adjusted regularly to keep pace with inflation and income growth.

The World Health Organization Framework Convention on Tobacco Control (WHO FCTC) provides a guideline on the implementation of

effective tobacco taxation.(6)

Other useful resources for tobacco excise taxation include

• The WHO technical manual on tobacco tax policy and administration,
  
• The Effectiveness of tax and price policies for tobacco control, and
  
• The economics of tobacco and tobacco control.(6-9)
  

Tax modelling

Country-specific tobacco tax simulation models simulate the effect of tobacco tax reform on tobacco consumption, tax revenue, and illicit trade. Such simulation evidence can be used to lobby for higher and better tobacco taxes. The Tobacconomics team discuss several tobacco tax simulation models that are useful to better understand tobacco tax modelling.(10) The Research Unit on the Economics of Excisable Products (REEP) and the WHO FCTC Knowledge Hub on Tobacco Taxation provide virtual and in-person training on how to do tobacco excise tax simulation models.(11,12)

Tobacco industry arguments against increasing tobacco taxation

The tobacco industry opposes tobacco tax increases, typically arguing that tobacco tax reform promotes illicit trade. The industry often exaggerates the size of illicit trade to support their argument. A 2018 systematic review of industry-funded data on illicit tobacco trade concluded that illicit trade estimates from the tobacco industry are unreliable.(13)

Contrary to the tobacco industry’s arguments, independent research has found that tobacco tax increases are not the primary cause of illicit trade.(14-16) Evidence suggests that illicit trade is in fact a problem of poor enforcement, weak governance, weak regulatory framework, informal distribution networks, porous borders, crime and corruption, and tax differences between countries/ jurisdictions.(16)

Furthermore, studies indicate that illicit trade is relatively larger in countries with low taxes and prices, and relatively smaller in countries with higher cigarette taxes and prices.(16)

Parties should use reliable evidence to refute the claims of the industry when they are wanting to implement higher tobacco taxes.

Resources for measuring illicit trade

Accurately estimating the size of illicit trade is a challenging exercise. The American Cancer Society and the Tobacconomics team prepared a toolkit on measuring illicit trade in tobacco products.(17) Some useful methods are detailed in this toolkit, including the cigarette pack examination methods and the gap analysis method. The first method involves examination of cigarette pack features to determine whether they are legal or not. These may be sourced via littered collections, directly from smokers or from retail outlets. The second method is a purely desk research method, and calculates the illicit market as the difference between the total cigarette market (obtained from surveys) and the legal (tax-paid) cigarette market.

Addressing illicit trade

Countries should ratify the Protocol to Eliminate Illicit Trade in Tobacco Products,and implement its provisions to secure the tobacco supply chain.18 This is done through, among other things, licensing, due diligence, and tracking and tracing.(19-21)

Other resources

Other resources for controlling tobacco illicit trade are The World Health Organization Framework Convention on Tobacco Control, which provides a guide on eliminating illicit trade, while the WHO FCTC and REEP E-Library provides a wealth of evidence-based literature in support of tobacco taxation and illicit trade.(18, 22)

Authors:

Vanessa Darsamo, Research Officer and Corne Van Walbeek, Director, Research Unit on the Economics of Tobacco Control

Zunda Chisha, WHO FCTC Knowledge Hub on Tobacco Taxation

Click here for the full list of references>

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Global Alliance for Tobacco Control

c/o HealthBridge

1 Nicholas St, Suite 1004

Ottawa, ON Canada K1N 7B7

Phone: 1 613 241 3927

Email: info@gatc-int.org

www.gatc-int.org

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