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Research paper

Contrasting academic and tobacco industry estimates of illicit cigarette trade: evidence from Warsaw, Poland Michal Stoklosa, Hana Ross ▸ Additional material is published online only. To view please visit the journal online ( tobaccocontrol-2013-051099). International Tobacco Control Research, American Cancer Society, Atlanta, USA Correspondence to Michal Stoklosa, International Tobacco Control Research, American Cancer Society, 250 Williams Street, Atlanta, Georgia 30303, USA; [email protected] Received 9 April 2013 Revised 11 July 2013 Accepted 12 July 2013 Published Online First 14 August 2013

ABSTRACT Objective To compare two different methods for estimating the size of the illicit cigarette market with each other and to contrast the estimates obtained by these two methods with the results of an industrycommissioned study. Methods We used two observational methods: collection of data from packs in smokers’ personal possession, and collection of data from packs discarded on streets. The data were obtained in Warsaw, Poland in September 2011 and October 2011. We used tests of independence to compare the results based on the two methods, and to contrast those with the estimate from the industry-commissioned discarded pack collection conducted in September 2011. Results We found that the proportions of cigarette packs classified as not intended for the Polish market estimated by our two methods were not statistically different. These estimates were 14.6% (95% CI 10.8% to 19.4%) using the survey data (N=400) and 15.6% (95% CI 13.2% to 18.4%) using the discarded pack data (N=754). The industry estimate (22.9%) was higher by nearly a half compared with our estimates, and this difference is statistically significant. Conclusions Our findings are consistent with previous evidence of the tobacco industry exaggerating the scope of illicit trade and with the general pattern of the industry manipulating evidence to mislead the debate on tobacco control policy in many countries. Collaboration between governments and the tobacco industry to estimate tobacco tax avoidance and evasion is likely to produce upward-biased estimates of illicit cigarette trade. If governments are presented with industry estimates, they should strictly require a disclosure of all methodological details and data used in generating these estimates, and should seek advice from independent experts.


To cite: Stoklosa M, Ross H. Tob Control 2014;23:e30–e34. e30

It has been well documented that the tobacco industry was, and probably still is, involved in smuggling of its products.1 2 Trading cigarettes illegally enables the industry to access closed markets, creates pressure for market openings,1 and helps to generate higher profits by circumventing tobacco taxation. Transnational tobacco companies have been found guilty of organising illicit tobacco trade, and have paid billions of dollars in fines and penalties in compensation.3 Yet, it does not stop the industry from being involved in national-level and international-level illicit trade control activities, and working together with governments and

intergovernmental agencies as a partner in combating illicit trade.4 One area of this collaboration involves estimating the scope of tobacco tax avoidance (legal methods of circumventing tobacco taxes) and tax evasion (illegal methods for circumventing tobacco taxes). In Europe, for example, as per a 12-year cooperation agreement between the European Union Member States, the European Commission and Philip Morris International (PMI),5 the scope of cigarette tax avoidance/evasion has been estimated by Project Star, a study relying on discarded pack surveys and industry data, conducted by KPMG LLP, and paid for by PMI.6 Project Star results are frequently used by the Commission and the local policymakers (eg, Ministry of Finance in Poland7 8). The illicit trade estimates produced by the tobacco industry have been also used to inform the foundations of public policies in countries outside Europe, such as South Africa9 and Australia.10 The tobacco industry uses its estimates to lobby against tobacco control measures,11 particularly tobacco tax increases, standardised packaging and product display bans.10 There is a tendency for the illicit trade estimates from the industry-commissioned studies to be higher than those from academic studies.12 Joossens et al13 compared the Project Star estimates with the estimates based on the data from packs presented by smokers interviewed in 18 European countries within the Pricing Policies and Control of Tobacco in Europe (PPACTE) project. They found that the Project Star estimates were higher in 11 countries, and lower in 5 countries, than those from the PPACTE project. Project Star estimates were also higher than those based on data from packs presented by smokers within the Global Adult Tobacco Survey in Poland (14.6% vs 8.5% in 2009).6 14 In Australia, the discrepancy between estimates from the industry-commissioned studies and those from the academic studies was even larger (15.9% vs 3% in 2010).15 There are two potential reasons for the discrepancy between the industry estimates and the estimates from academic studies. First, the inconsistency might result from the differences between the methods applied. The discarded pack collection, a method frequently used by the industry (eg, Project Star), might overestimate illicit trade, because those who litter might be less likely to obey rules, such as buying only legal cigarettes.16 On the other hand, surveys of packs presented by smokers, a method often used by researchers (eg, Cambodia,17 Poland,14 18 Ukraine 19), may

Stoklosa M, et al. Tob Control 2014;23:e30–e34. doi:10.1136/tobaccocontrol-2013-051099

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Research paper underestimate the illicit trade, because individuals who purchased cigarettes illegally might be less willing to present their packs.18 Second, since the tobacco industry has a long history of manipulating evidence for their benefit,20 some suggest that the industry estimates exaggerate the scope of illicit trade. For example, Adams and Effertz pointed out that in Germany the sampling method used by the industry was not nationally representative, with systematic over-representation of geographical regions along the country’s border and around USA military bases, where more tax avoidance and evasion is expected.21 In the UK, the Tobacco Manufacturers Association also conducted studies of illicit trade based on non-representative samples of littered cigarette packs.16 With limited information about the methodology of the industry-commissioned pack collections it is difficult to determine the exact reason for the discrepancy. This paper offers the first comprehensive comparison between two methods that use pack data to estimate cigarette tax avoidance and evasion: survey of packs in personal possession and packs discarded on streets. It also compares the results from these two methods with results from an industrycommissioned study.

DATA AND METHODS We used two observational methods: data collection from packs in smokers’ personal possession and packs discarded on streets. The collection took place in Warsaw in September–October 2011. Two pack features determined whether the pack was intended for the Polish market: excise tax stamps and health warnings. Each legitimate cigarette pack must bear a Polish tax stamp and an approved health warning in Polish. The tax stamp is affixed under a cellophane cover.22 In order to determine whether a tax stamp was legitimate, we compared it with a sample of official tax stamps provided by the Ministry of Finance.23 A missing tax stamp is not always an indicator of tax avoidance/evasion. The stamps may be removed by a consumer, or may fall off a pack, especially in case of discarded packs. Therefore, only packs with a tax stamp issued by another country or without the Polish health warning were classified as packs non-taxed in Poland. Packs with missing or damaged tax stamp, but with a Polish health warning were counted as tax-paid cigarettes. Data from packs in personal possession were collected by a market research agency, GfK Polonia, in Warsaw in October 2011 using a quota sampling method. The data collection protocol was approved by the Northeastern Illinois University Institutional Review Board. The population of smokers in Warsaw was segmented by districts and by gender and age. The quota of 400 observations was distributed among each of Warsaw’s 18 districts proportional to the districts’ population. As no Warsaw-level data on gender and age of smokers were available, the gender and age sample proportions were based on characteristics of smokers living in Polish cities with more than 500 000 inhabitants (see online supplementary appendix 1 for the gender/age and the district sample proportions). The interviews were conducted at various times of the day in an effort to include smokers who are not at home during working hours. Each interviewer had a number of randomly assigned street addresses as starting points in a district. This number depended on the quota for that district. From a given starting point, the surveyor had to conduct five interviews before moving on to their next starting point in another neighbourhood. If the starting point address was an apartment

building, the interviewer would go to a randomly selected apartment. In each household, the surveyors would ask for a smoker, and if the person met the age and sex criteria, the interview was conducted. To choose the next household, the surveyor could ask if any of the neighbours was a smoker (snowball method) or go to the next household three doors away. During each interview the smoker was prompted to show all open cigarette packs in their possession. This is different from the Global Adult Tobacco Survey that asked smokers to show only one open pack. The information on number of open packs and the presence/absence of Polish tax stamp and health warning on each pack was collected. If more than one pack was open, the tax avoidance/evasion was assessed based on the pack being smoked most often, as indicated by the smoker. Additionally, detailed information on the non-tax-paid packs was collected, including the information on the tax stamp (country issuing the stamp/stamp damaged/no stamp), the health warning (language of the health warning/no warning), the maximum price of the pack ( printed on the bottom of the pack), the brand and the year the tax stamp was issued. The smoker was asked about the place of purchase of the pack. Sociodemographic characteristics of each smoker were also collected. The pack characteristics data were weighted by the selfreported amount of monthly cigarette consumption (eg, data collected from a person who smokes 60 packs a month would count twice as much as the data collected from a person who smokes 30 packs a month). The discarded packs were collected in September 2011 in 30 of 783 voting districts in Warsaw. Our methodology was inspired by methods developed by David Merriman and applied in his studies in Chicago16 and New York.24 The sample voting districts were selected randomly using the probability proportional to size method, so that the probability of each district being selected was weighted by the number of adult permanent residents of that district. In each selected district, we designed a 3 km (1.86 miles) route on which two people picked up every littered cigarette pack. A typical route required data collectors to walk 1.5 km along several streets in the district and returning back to the starting point on the other side of the streets. Because voting districts are small geographical areas, a typical route would cover a substantial portion of each district (see online supplementary appendix 2 for more information on the routes design process). A total of 754 packs were collected, each placed in plastic bags, labelled with a unique serial number, and returned to the research office where pack data were entered to a database. That information included cigarette brand, package type (hard/soft), cigarette length, cigarette type (filtered/unfiltered), tax stamp details (country issuing the stamp/stamp damaged/no stamp) and health warning details (the language of the health warning/no warning). We compared our results with results from an illicit cigarette study commissioned by four major tobacco companies (British American Tobacco, Imperial Tobacco Group, Japan Tobacco International and PMI) and conducted by the Almares market research company in August–September 2011.25 Despite the original sampling target of 34 000 packs, the study collected 694 547 discarded cigarette packs from streets and public bins in 70 cities in Poland. The reason this sample size changed so dramatically remains unclear. The sampling plan called for 15.6% of the sample packs to be collected in Warsaw; therefore we estimate that over 100 000 cigarette packs were collected in this city alone, a sample over 100 times larger than our sample. Despite internet searches and multiple attempts to contact the tobacco manufacturers and the research company, we do not

Stoklosa M, et al. Tob Control 2014;23:e30–e34. doi:10.1136/tobaccocontrol-2013-051099


Downloaded from on March 30, 2015 - Published by

Research paper have all details of the method used by the tobacco industry. For example, we lack information on how the sample paths and bins for the discarded pack collection were selected, what pack features were taken into account when deciding whether the pack is tax-paid or non-tax-paid. We only know that the packs were examined by the four respective producers to find counterfeit cigarettes. We used a Pearson χ2 statistic to compare the results of our pack collection with the industry results. To account for the weights in the survey data when comparing the results of our two methods, we employed a second-order correction of Rao and Scott that uses the F statistic.26

RESULTS Using the survey data (N=400), we estimate that the share of non-taxed cigarettes reached 14.6% (95% CI 10.8% to 19.4%) of the total cigarette market in Warsaw. Using the discarded pack data (N=754), we estimate this share at 15.6% (95% CI 13.2% to 18.4%). The difference between these two estimates was not statistically significant. The survey found that 14.8% (95% CI 10.9% to 19.6%) of the packs smoked in Warsaw did not have the Polish excise tax stamp, while the share of packs without Polish tax stamp was 23.6% (95% CI 20.7% to 26.8%) among those found on the streets. This was due to higher proportion of packs with damaged or missing stamps among the discarded packs. The difference between the two proportions is statistically significant. The share of packs without Polish health warning was 14.6% (95% CI 10.8% to 19.4%) based on the survey and 15.6% (95% CI 13.2% to 18.4%) based on packs found on the streets, a non-significant difference (table 1). Eight smokers in the household survey (2%) presented taxed and non-taxed packs. Half of them indicated the taxed pack as being smoked most often. Fifty smokers (12.5%) presented packs that were not intended for the Polish market. When the pack information from the surveys was weighted by the declared number of cigarettes smoked each month, the share of non-taxed cigarettes reached 14.6% due to higher smoking intensity among smokers avoiding/evading taxes. The study of discarded packs commissioned by the tobacco companies classified 22.9% of packs found in Warsaw as not intended for the Polish market, but we do not know the characteristics of these packs. This estimate is 47% higher compared with our estimate based on discarded packs (15.6%), and this difference is statistically significant (χ2=22.327; p

Contrasting academic and tobacco industry estimates of illicit cigarette trade: evidence from Warsaw, Poland.

To compare two different methods for estimating the size of the illicit cigarette market with each other and to contrast the estimates obtained by the...
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