[Intl-tobacco] CLARKE: Dilemma of a cigarette exporter (fwd)

[Robert Weissman]

CLARKE: Dilemma of a cigarette exporter
by Kenneth Clarke
Source: The Guardian/The Observer, Thursday, 2/3/00

    =09The Guardian this week disclosed 1993 BAT plans to "grow our
business" in smuggled markets. We invited the former Conservative
chancellor of the exchequer, now BAT's deputy chairman, to respond

Kenneth Clarke

=09 British American Tobacco is a good corporate citizen which
maintains high ethical standards. We reject allegations that we have
"condoned tax evasion and exploited smuggling". We seek to work with
governments around the world to find solutions to the problem of
smuggling.

Smuggling is a serious global problem faced by many industries including
alcohol, electronic goods, cars and tobacco. It is caused by high tax
levels, different levels of tax on two sides of a border and the
imposition of national trade barriers to legal imports.

Tobacco products command high values. They are easily transportable,
making them an easy target for smugglers. Too many governments follow a
policy of raising tobacco taxes to excessive levels and ignore dramatic
tax differentials between neighbouring countries. Smuggling is boosted by
every tax-change that improves the profit margin for the smugglers. The
effect of such a policy can clearly be seen here and now in the erosion of
the legitimate tobacco market in the UK, due to far higher British taxes
than those in mainland Europe. The level of tobacco smuggling into Britain
today is higher as a proportion of the total market (over 25%) than it is
in Colombia (below 10%).

British American Tobacco sells goods through wholesalers and distributors.
We invest heavily in building a legitimate business through proper and
well-managed distribution networks. In many markets we suffer from
smuggling. It is not in our wider commercial interests to encourage or
condone smuggling and it is certainly contrary to our standards as a
responsible company.

Our policy therefore is to engage in constructive dialogue and to
cooperate with governments to try to eliminate the causes of the
smuggling. British American Tobacco group companies work with governments
and customs and trade authorities around the world and we sometimes have
successes, proposing solutions and supporting initiatives to help reduce
the problem. We have reached an agreement with the government of Colombia,
for example, which has dramatically reduced the proportion of their market
taken by smugglers despite the long-standing tradition of smuggling many
products that is endemic to parts of that country.

However, where governments are not prepared to address the underlying
causes of the problem, businesses such as ours who are engaged in
international trade are faced with a dilemma. If the demand for our brands
is not met, consumers will either switch to our competitors' brands or
there will be the kind of dramatic growth in counterfeit products that we
have recently seen in our Asian markets. Where any government is unwilling
to act or their efforts are unsuccessful, we act, completely within the
law, on the basis that our brands will be available alongside those of our
competitors in the smuggled as well as the legitimate market.

British American Tobacco group companies around the world are good and
reliable taxpayers. We provide some =A313bn annually to national exchequers
through excise duties and other taxes which is well over 10 times as much
as the group's combined profit after tax. Governments are, and always have
been, significant stakeholders in our business.

We aim to act responsibly to the benefit of all our stakeholders:
shareholders, customers, consumers, governments, employees and suppliers.
We are as aware as every member of the public that our products are often
smuggled. Our business interests are damaged by the prevalence of
smuggling. When governments and health campaigners are prepared to accept
policies to reduce and control smuggling we will always welcome such
policies and cooperate with them.