In May 2017, the Mongolian government had increased the import tobacco tax by 30%, followed by a 10% excise tobacco tax increase in January 2018. Reports from around the globe have indicated that a rise in tobacco tax tends to increase the rate of illicit trade. The study titled, “Impact of tax increases on illicit cigarette trade in Mongolia,” aimed to explore whether this was the case in Mongolia.
Contrary to global trends the tax increase in Mongolia seemed to lead to a decrease in illicit trade.
The researchers collected discarded cigarette packs in the capital city and in two provinces near China, the Russian Federation and Kazakhstan. Tax increases had occurred between all three rounds and illicit cigarette packs were identified if they either had no excise tax stamp, and/or no traces of a tax stamp.
In the first round, 15.4% of the collected packs were found illicit, in the second round the amount had decreased to 13.6% whilst in the third round 3 it had decreased further to 6.3%. Contraband cigarettes were found to originate mainly from the Republic of Korea and Ukraine, but some were manufactured in Mongolia.
The compiled data indicated that contrary to international reports, the tax increase in Mongolia did not lead to an increase in illicit tobacco trade but quite the contrary, this seemed to decrease with every round.
Illicit trade on the rise in Ontario
Meanwhile, another recent study conducted in Ontario, suggested that smoking contraband cigarettes rose from 25% in 2016, to 31% this year. In line with the figures obtained by this research, another study published earlier this year reported similar findings, indicating that 32% of people in Ontario reported buying contraband cigarettes, with the largest percentage of them found in northern Ontario.