By Hana Ross

Even among members of the tobacco control community, there is occasionally confusion about what some words refer to in a specific context. I thought it would be useful to draw some distinctions between terms so that we can share a common vocabulary.

Tax Avoidance and Tax Evasion
Tax avoidance is legal; tax evasion is not. For example, bringing a limited quantity of cigarettes from one country or a duty-free shop into another country is permissible, and legal. When you bring more than a carton or whatever quantity is allowed, you are evading tax and committing an illegal act to the extent that your quantity exceeds the limit.

The difference between these two is simple, yet both the legal and illegal packs look the same. Neither of them will be accounted for in reporting of properly taxed cigarettes consumed in the destination country. These cigarettes (both legal and illegal) must be added to the consumption figures if you want to capture the size of the entire market in a given locale.

There are a variety of methods to estimate the quantity of tax avoidance and tax evasion, but since in many cases the packs are not distinguishable, we need to be clever in designing the appropriate techniques. Tax avoidance, for example, can be estimated using statistics on cross-border shopping, duty-free sales, and by asking travelers about their purchasing habits. Estimating the size of tax evasion is a bit trickier, because smokers often do not know if they consumer a legal or an illegal product. And always remember – these are just estimates and their quality depends on the methodology, the execution, and the amount of money spent on generating these estimates.

Illicit Whites and Counterfeit Cigarettes
Illicit whites are cigarettes manufactured legally, but solely for the purpose of tax evasion. This tax evasion occurs when they are sold illegally into another destination without paying taxes. They can be illegal also on other counts, since they often don’t comply with labeling and content requirements.

Counterfeit cigarettes, on the other hand, are manufactured by the unauthorized or unlicensed manufacturer; they are made to look like a known brand, and are meant to deceive consumers as well as to avoid paying duties.

The word “smuggled” might best be avoided except as a broad category because it is insufficiently descriptive of the origin and excise tax status of a pack. On the other hand, if you want to impress friends and acquaintances with the “cloak and dagger” intrigue of working in tobacco control, it’s the perfect word to use!

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