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A few economic aspects of tobacco smuggling in Hungary

A few economic aspects of tobacco smuggling in Hungary. Bodrogi József Szeged, 17th of June 2011. Introduction. This lecture is about smuggling but its goal is to assess the size of tobacco consumption in Hungary.

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A few economic aspects of tobacco smuggling in Hungary

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  1. A feweconomicaspects of tobaccosmugglingin Hungary Bodrogi József Szeged, 17th of June 2011

  2. Introduction • This lecture is about smuggling but its goal is to assess the size of tobacco consumption in Hungary. • Due to the Hungarian statistical law from 2005 the CSO may not publish production data.

  3. Smuggling • Has two main forms • Large-scaleorganizedsmuggling of tobaccoproducts (illegaltranportation, distributionorlargeconsignmentsoftobacco • Bootlegging: individualorsmall-grouppurchases of tobacco • Causeshugedamagein Europe • Itssize is cca. EUR 10 billion (greaterthanalcoholsmuggling) • approximatesdrugsmuggling(legalconsequencesare less serious,sameprofitability, largesmugglergroupareinvolved) • profit ononetruckload of smuggledtobacco is about EUR 2 millionin England (highestin Europe) • BAT has signedten-yearagreementwith EC tocombattobaccosmuggling

  4. Smuggling • 30% of world export, 350 billion pieces, are smuggled • Smuggling in a few countries Source:Merriman et al. Cambridge, Mass National Bureau of Economic Research

  5. Smuggling in Hungary

  6. Smuggling in Hungary in 2000-2010 • Till 2004 smuggling grew considerably, since that time it has been decreasing: • Hungary has become a transit country • the efficiency of control has increased • According to literature, smuggling will only bring profit if twice the confiscated amount can be sold in the market.

  7. Main smugglingroutesto Hungary

  8. Main smugglingroutesto Hungary • Greenborder • RiverTisza • Hamburg • Bootlegging: • Záhony,1 millionentrants/year (38 millionpieces), • Röszke, 1 millionentrants/year (76 millionpieces) • 1% of totalconsumption* • Estimatedsmuggling (2010) effectingtheconsumption • 2.54+0.11=2.65 billionpieces - 18% *NAV estimation 2010

  9. Consumption and excisetax 2000-2010

  10. Consumption and excisetax 2000-2010 • Conclusions: • Role of smuggling will grow in the next 18 months as a result of triple excise tax raises • Tobacco excise tax accounts for 1/3 of overall excise tax revenue in Hungary. • As we know, the state budget has no bottom...

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