By Peter Bismark KWOFIE
In a coordinated effort with the military command and other security agencies, the Customs Division of the Ghana Revenue Authority recently convened in the North, Tamale, to destroy millions of seized tobacco products that illegally found their way into the country.
In an interview, a leader of the task force revealed that the Ghana Revenue Authority (GRA) suffered a staggering tax loss of GH₡7,951,238.39 (517,642.56 USD) as a result of the seized tobacco products. The officials also expressed alarming concerns over the billions of Cedis lost annually on a national scale due to tax evasion, highlighting the urgent need for improved tax compliance and enforcement.
The World Health Organization’s Framework Convention on Tobacco Control (WHO FCTC) which was implemented over two decades ago, recognises that cooperative action is necessary to eliminate all forms of illicit trade in cigarettes and other tobacco products, including smuggling, illicit manufacturing and counterfeiting.
In many countries in Sub-Sahara Africa (SSA), including Ghana, there is still a lot that can be done to effectively combat illicit trade. Despite Ghana’s early ratification of the FCTC in 2004, the Protocol to Eliminate Illicit Trade in Tobacco Products in 2021, and subsequent efforts to fight tobacco usage-related issues, progress in implementing tobacco control measures has been slow, and significant work remains to be done to address this critical issue.
The Ghana Revenue Authority’s revelation of millions of Cedis lost to the illicit tobacco trade further confirms that there is still room for a lot of improvement in curbing the problem. With a loss of GH668 million (0.2% of Ghana’s GDP) in 2019, Ghana is making inroads to contain illicit trade. By making illicit trade more difficult and punitive for illicit dealers, we can potentially reduce the illicit trade and generate more revenue, ultimately contributing to a better economic environment for the nation.
Around 12% of total cigarettes are sourced from the black market; that translates to about 460 billion illicit cigarette consumption according to reports. In Ghana, illicit tobacco products constitute about 30% of the market share as estimated by Customs, Excise and Preventive Services (CEPs).
These products enter the country through unauthorized channels and, in some cases, through official entry and exit points with the cooperation of corrupt officials. A significant portion of these illicit products find their way to Northern Ghana, which is considered a major hub for illicit trade within the country.
The illicit tobacco trade has evolved into a profitable and deeply ingrained industry, fueled by a combination of factors including organized crime, money laundry, traffic of influence, weak regulations, insufficient sensitization and awareness, inadequate enforcement, and absence of tougher sanctions for illicit dealers.
Due to its entrenched nature, a comprehensive and sustained strategy is required to tackle the root causes and effectively dismantle the illicit tobacco trade syndicates, rather than relying on a single, one-time solution. Illicit tobacco products are cheap, and accessible and undermine efforts to protect or discourage minors from smoking.
While some individuals encourage higher taxes on the products, it has been argued that this only further aggravates the problem. The recent case of Ghana serves as an example where illicit trade has grown by over 35% in just 2years since the last excise increase.
Illicit trade also distorts the playing field for legitimate products and reduces government revenue through smuggling, fraud, white illicit, bootlegging, and false import declarations. It undermines fair competition by flooding the market with cheaper, counterfeit, and substandard goods, ultimately harming jobs and investment.
The business of illicit trade corrodes the rule of law, and encourages corruption and bribing public officials, thereby further compromising border security, and distorting incentives for legitimate trade and effective customs enforcement. Illicit trade not only harms businesses and economies but also perpetuates corruption and weakens institutional integrity.
The benefits of mitigating illicit tobacco trade cannot be overstated, and exploring ways to address this menace within this framework is a worthwhile endeavour.
There is the need for the government to go beyond seizures and destruction, to increase the sanctions, including but not limited to, closure of illicit facilities and storage locations, withdrawal licenses, impounding of assets of these illicit dealers, imprisonment and jail terms for any identified dealers and their accomplices.
A rather difficult but bright side of this challenge is an opportunity for jobs created by solving illicit trade. Technology students, researchers, and entrepreneurs among others have taken up the issues of illicit trade as projects to investigate and find solutions to address the menace.
The Ghana Revenue Authority App is still in the offing and the innovation is designed to among other features track and trace system for tobacco products. It will also monitor in real-time movement of tobacco products throughout all stages of the supply chain — from importation, and verification to distribution.
This technology or management platform has other bodies including the Food and Drug Authority (FDA) included in it. These efforts demonstrate a step forward in addressing the issue and allow technology enthusiasts to harness their skills towards development. Collaboration between Ghanaian agencies is crucial for mitigating illicit trade practices and holding perpetrators accountable. One important measure to curb illicit activity is to scrutinize the financial institutions used by criminals. Banks should be penalized for housing the finances of criminals and implementing stricter Know Your Customer (KYC) procedures on funding sources would be a significant deterrent.
The discussion on tobacco control in Ghana is often hindered by a lack of comprehensive data. To address this, there is a need for extensive research and surveillance to gather accurate data on illicit tobacco prevalence, distribution, usage patterns, and determinants across various age groups, both nationally and regionally.
It is essential to mobilize financial and human resources, engage stakeholders from non-governmental organizations and the private sector, and foster collaborative efforts to strengthen national tobacco control programs, inform policy decisions, and drive research advancements.
The expansion of global trade has heightened the vulnerability of developing countries to illicit activities involving counterfeit, and substandard goods. There is a consensus among experts, government officials, and private sector stakeholders that additional resources are necessary to combat illicit trade. Moreover, prioritizing the prosecution of these crimes as stated previously, is essential. However, law enforcement faces challenges due to a system that allows corrupt and influential businessmen to wield significant power and evade accountability, perpetuating a culture of impunity.
About author:
The writer is the President and Chief Executive of the Institute for Liberty and Policy Innovation (ILAPI)
