Tax avoidance and illicit production and distribution
Both illicit production and trade of original or counterfeit tobacco products aim at eliminating tax liabilities completely. Illicit production of counterfeit tobacco products, which may be carried out by legal manufacturers who declare only a fraction of their production to the tax authorities or by unlicensed manufacturers, pose serious risks to public health and to the governments. Similarly, illicit trade of these products remains a serious global and public health problem.
Recently, governments have adopted a variety of approaches, from tracking and tracing cigarette production and distribution to strengthening enforcement efforts and increasing penalties, in their efforts to curb illicit tobacco production and trade. Article 15 of WHO Framework Convention on Tobacco Control (WHO FCTC) includes measures related to the reduction and elimination of the illicit supply of tobacco products. Furthermore, Parties of the WHO FCTC adopted in November 2012 a Protocol to Eliminate Illicit Trade in Tobacco Products. This Protocol builds on Article 15 and sets the rules for combating illegal trade through control of the supply chain and international cooperation.