Theacquisition
and the
consumption
of illegalcigarettes
generatesrevenue
for financingother
activities, likethesales
ofdrugsandweapons
CarlosGalant,
diretorexecutivo
daAbifumo
everybody
B
razil is witnessing a reduction in the consumption of legal cigarettes, which
amounted to 13% in 2015 comparedwith the previous year, according to data
released by the Federal Revenue Service. Officials of the Brazilian Tobacco In-
dustry Union (Abifumo), maintain that the fact “is directly linked to the ciga-
rettes smuggled into the Country, where many people are shifting from legal
cigarettes to illegal tobaccoproducts”. In2015, saysCarlosGalant, executivedirector of the
Abifumoisin
favorofbalanced
taxationand
extensive
monitoringof
Brazil’sfrontiers
inorderto
curbtheillicit
cigarettetrade
entity, 30% of the Brazilian market of the segment was dominated by smuggled brands, resulting into taxation losses of R$ 4.9 billion to the
Country,with illegal cigarettes accounting for 67%of everything that enters theCountry illegally.
The problem is getting worse and, according to information from Leonardo Senra, financial director at the cigarette manufacturer Souza
Cruz, released in October 2016, the share of the illicit trade reached 35% a year, while in 2011 it was 21%. In the meantime, according to the
When
loses
Awarenessappeal
Abifumo calls for “greater government awareness regarding the causes that
strengthen cigarette smuggling, like price disparity between legal and illicit products
and tax evasion that directly competewith the formal industry, without collecting tax-
es”. The president of the entity, Carlos Galant, believes that “based on balanced and
coherent taxes, along with intelligence in monitoring the borders of the Country, it is
possible to curb the sales of smuggled cigarettes. “Finally, he stresses that “society
plays an essential role in this fight, and it is of fundamental importance that for the
consumers to be aware of the fact that by consuming illegal cigarettes they are direct-
ly financing criminal organizations, responsible for theft and drug trafficking.”
same source, taxes on cigarettes increased by 140% and are now ranging from 75% to
88%over the price of the product, depending on the State and on the local taxation per-
centages.Within this context, the company announced its decision to shut down its ciga-
rette factory in Cachoerinha, in Grande do Sul, “in light of the rampant growth of contra-
band in the Country” and due to the constant tax increases levied on the sector.”
Abifumo, in the words of Carlos Galant, reinforces the idea that the acquisition and
consumption of illegal cigarettes generates revenue for financing other activities, like
the sales of drugs and weapons. This makes it necessary for “the government and the
sector to create awareness among society, as well as a manner to mitigate this prob-
lem”. Within this context, the institution has it that “higher taxes, associated with the
fragility of the Brazilian frontiers, as well as the absence of market inspection, are fac-
tors that contribute towards the entrance and sales of illicit products in the Country.”
In 2015, according to sources from the entity, the seizure of illicit cigarettes were
equivalent to R$ 342 million, “a value that might be seen as high, but represents only
a small portion of the amount of illegal cigarettes that enter the Country”. Therefore,
Galant maintains that, “there is need to increase and encourage the security forces lo-
cated at the frontiers of the Country to protect and prevent any illicit cigarettes from
crossing the borders”. He recalls that now 3 thousand agents are responsible for pro-
tecting this vast frontier and inspect all entry points into the Country, compared to 40
thousand in Germany, a country that is 24 times smaller than Brazil.
n
Inor Ag. Assmann
36
