La incidencia de los IIEE sobre las labores del tabaco en la evolución del comercio ilícito de estos productos. El caso español

Abstract

The European Union has experienced a considerable increase in tobacco excise taxes in recent years. In Spain, with the exception of Canary Islands, tobacco is one of the most taxed products, especially cigarettes. Reasons why tobacco product taxes are so high are mainly divided in two areas: to discourage demand, because tobacco is harmful for health, and to increase government revenue. The problem is that an increase of taxes, up to a certain limit, produces a shift in the demand towards illegal markets, where consumer can obtain products at lower prices. Tax evasion allows smugglers to offer their product at a much more competitive price, generating a big gap between prices of cigarettes in legal and illegal channels. The objective of this research work is to analyze the relationship between taxes and smuggling of tobacco products. To deeply understand the contextual framework of this relationship, the tobacco market development and its different categories as well as the behavior of the illegal market in the European Union and Spain will be examined. In this study, by estimating ordinary least squares panel data, we show that a tax increase causes a rise in the amount of illegal cigarettes trade, while other factors that affect smuggling remain constant. These results are consistent with both the model for Spain and for the European Union. With these results in mind, we provide some recommendations to try to reduce the illicit trade of tobacco products in Spain as the establishment of a reasonable fiscal policy; not increasing the price gap in countries close to markets where tobacco is cheaper; the increase of resources allocation to fight against smuggling; the reduction of exemption from duties for certain markets and the duty free control.