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Traders association: cigarette contraband will increase dramatically

Photo: State Revenue Service.
Latvian Traders Association is worried – by reducing availability of tobacco products in stores and other trade locations, the proportion of products sold ‘under the radar’ will only increase. And this is basically what amendments to the Law on Tobacco Products Circulation.

The association believes this is proven not only by experience of other countries but also the survey performed by Market and Social Studies Agency in October in regards to the attitude towards tobacco product restrictions and their efficiency.

Survey data shows that 23% of respondents said that if tobacco products are made less accessible to them, they would likely buy contraband cigarettes. According to estimates of the Latvian Traders Association, this would cost the state budget up to EUR 25 million in unpaid tax.

«Our association has voiced protests against such unreasonable amendments on multiple occasions. It is not possible to reduce use of tobacco products with flawed restrictions – they never help reduce tobacco consumption. It is far more important to educate society. Restrictions like that only create obstacles for legal traders, especially small shops in the countryside, which are unable to comply with requirements of the law and will likely be forced to pull cigarettes from trade,» says Latvian Traders Association President Henriks Danusevičs.

He continues: «This turn of events would benefit smugglers, for whom this will be a great opportunity to make some easy money. Although the fight against smuggling has been successful in recent years, experience shows that approval of this trade restriction would start a new wave of contraband goods being sent to Latvia. Legal traders and the state budget would suffer the most from this».

Latvian Traders Association once again emphasizes that this proposal is basically aimed at division in retail trade. If this proposal is approved, large traders would gain major advantages, which would bring tobacco retail trade in the hands of certain companies.

«It is important to keep in mind that a general tobacco retail restriction would impact small stores the most. With that, it is worth asking if restrictions of this kind, the efficiency of which in combating smoking is not proven anywhere, are even supportable, considering the major risks. It is also important to consider other solutions that would reduce visibility of tobacco products in stores on one hand, and be balanced in regards to its effect on the state budget and small stores,» says Danusevičs.

It should be said that study results show that there is a belief in Latvian society that restriction of availability of legal tobacco products would benefit circulation of illegal tobacco products. This belief is held by 72% of interviewed Latvian residents.

In addition, more than half of interviewed smokers said restriction of legal tobacco trade would benefit smuggling. 23% of interviewed smokers said they would buy contraband cigarettes if legal tobacco products become limited.

The association notes that a quarter of Latvia’s existing cigarette marker consists of contraband, for which the state budget loses approximately EUR 65 million every year in the form of unpaid taxes, according to estimates from KPMG.


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