Counterfeit Cigarettes Costing The Government

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Man smoking counterfeit cigarettes

According to the Managing Director of Carreras [JSE: CAR], Marcus Steele, the Jamaican government is currently losing revenue from the excise tax imposed on cigarettes and tobaccos in 2017.

Even though the government raised the tax on each cigarette from $14 to $17, it is said that they are still losing an estimated JA$1 billion in tax when compared to previous years.

Reason being, Carreras has had to pass on the consumption tax bump to its customers through increased cigarette prices. However, persons are finding cheaper ways to smoke.

Smokers are purchasing cheap illegal cigarettes to avoid paying more for the product. Fewer sales for Carreras means less tax for the government as the illicit traders of tobacco and cigarette do not pay tax.  With a sale price as low as $20 per stick for illegal cigarettes and a sale price of up to $55 for Carreras cigarettes, consumers are choosing the former.

The illegal tobacco business is currently earning up to JA$5 billion in revenue which is 30% of the local tobacco market; not half as much as Carreras makes in revenue, but a significant loss in business. The income from the illegal cigarette trade is expected to continue growing if the government does not roll back the excise tax.

Steele says the government looks at the Tobacco Industry as a means of bridging the gap in its budget yearly but should consider the industry as a means of sustainable revenue for the country.

In 2017, Carreras made JA$13.5 billion in revenue of which it paid almost 43.7% in tax to the government when compared to 2016, where the company paid 42% of its revenue of JA$12 billion in tax.

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