Oxford Economics

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Background

Oxford Economics was founded in 1981. It claims to be one of the world’s leading independent global advisory firms that forecasts external market trends and assesses the economic, social and business impact of these trends.[1] Oxford Economics has offices in Oxford, London, New York, Singapore, Belfast, Chicago, Dubai, Miami, Milan, Paris, Philadelphia, San Francisco and Washington DC. The organisation describes itself as; a key adviser to corporate, financial and government decision-makers and thought leaders, with a client base of over 1,000 international organisations, including:

  • leading multinational companies;
  • financial institutions;
  • government bodies and trade associations;
  • top universities;
  • consultancies;
  • think tanks.[1]

A Powerpoint presentation on its website says that it can provide deep coverage of 100 industrial sectors, including tobacco.[2]

Relationship with the Tobacco Industry

Oxford Economics has collaborated with the International Tax and Investment Center to produce three reports – that we are aware of - on the illicit trade in Asia funded by Philip Morris.[3]

ITIC is funded by major multinational corporations including all of the leading transnational tobacco companies (TTCs): Philip Morris (PMI), Japan Tobacco International (JTI), British American Tobacco (BAT), and Imperial Tobacco.[4] Its Board of Directors includes representatives from each of these companies.[5]

Asia 11 – Illicit Tobacco Indicator 2012

In September 2013, Oxford Economics published the findings of its Asia-11 study that it conducted with ITIC on behalf of Philip Morris Asia (an affiliate of PMI), in order to quantify the illicit trade in 11 Asia Pacific markets.[6]

Asia-11 refers to a group of markets which includes Australia, Brunei, Hong Kong, Indonesia, Malaysia, Pakistan, Philippines, Singapore, Taiwan, Thailand, and Vietnam.

The report claimed that:[7]

  • 66.5 billion (9%) cigarettes consumed in the countries surveyed were illicit – either illegally imported (5.6%) or illegally manufactured locally (3.4%);
  • Brunei, Hong Kong, Malaysia and Singapore, countries with high tobacco taxes, had the highest volumes of illicit cigarettes – over 25% in 2012;
  • Governments were losing billions of dollars lost tax revenue due to illicit trade.

The Asia-11 report has been critiqued in a report by the Southeast Asia Tobacco Control Alliance (SEATCA). SEATCA argued that the Asia-11 report was biased in favour of the tobacco industry because:

  • the big four transnational tobacco companies are members of ITIC (one of the authors);
  • the report was funded by Philip Morris International;
  • the report’s conclusions were in line with the industry’s rhetoric that illicit trade is an ever increasing problem and that public health interventions like tax increases should be modest.

Furthermore, a peer-reviewed study published in the journal Tobacco Control attempted to validate Oxford Economic’s and ITIC’s estimate that 35.9% of tobacco consumed in Hong Kong in 2012 was illicit. Using data from government reports and publically available routine data, the authors of the Tobacco Control article estimated that illicit cigarette consumption was between 8.2% and 15.4% of the total cigarette consumption in Hong Kong in 2012.[8]

Asia 14 – Illicit Tobacco Indicator 2013

In September 2014, on behalf of PMI, Oxford Economics and ITIC published Asia-14, Illicit Tobacco Indicator for 2013.[9] Asia-14 refers to a group of markets, which includes all of the aforementioned countries in the Asia-11 report plus, three additional countries, Cambodia, Laos and Myanmar.

Oxford Economics and ITIC claimed that in 2013:

  • 10.9% of cigarettes consumed in Asia-14 were illicit;
  • Illicit consumption rose in 7 out of the 11 markets examined in the previous Asia-11 report;
  • Government tax losses totalled 3.9 billion US dollars.

Again, SEATCA offered a critique of the PMI funded report undertaken by Dr Hana Ross, an expert on the economics of tobacco control.[10][11] SEATCA claimed that the figures and statistics presented in the Asia-14 report were “incorrect” or “unverified/unverifiable”, and were are “not comparable across countries and are inconsistent with results from other studies” in the region.[11] Furthermore, SEATCA criticised the report’s lack of transparency in relation to its Empty Pack Survey (EPS) methodology used to estimate levels of illicit, the following excerpt is taken from SEATCA’s critique:

"The Empty Packs Survey (EPS), which is a crucial component of the “IT Flows model” upon which most of the report is based, does not fully disclose its sampling frame, the timing of data collection, the criteria for distinguishing legal and illegal packs, and other crucial survey parameters, even though the validity of data generated by the survey are very sensitive to such issues."

And:

"No information is provided about the packs that could not be classified as illegal or legal with certainty, and whether or not the collected packs are available for reinspection."

EPS methodology involves the collection of discarded packets in order to identify non-domestic packs which have not paid the country specific duty. This methodology has been criticised by researchers at the University of Bath for its inability to distinguish between legal cross-border duty-free product and that which has been illegally smuggled into the country thereby leading to overestimations of illicit.[12]

Asia-16 report: Hong Kong published by Oxford Economics October 2015

Asia 16 – Illicit Tobacco Indicator 2014

In October 2015, on behalf of PMI, Oxford Economics and ITIC published Asia-16, Illicit Tobacco Indicator for 2014, however, access to the full report requires a membership log in account. Nevertheless, a report for Hong Kong alone is available online.[13]

Asia-16 refers to a group of markets, which includes all of the aforementioned countries in the Asia-14 report plus, two extra countries Macao and South Korea.

Press coverage of the Asia-16 report in the Philippines and Macau in late 2015 highlighted the potential bias of the reports and referred to previous critiques of the Asia-11 and Asia-14 reports offered by SEATCA.[14][15]

Oxford Economics Rejects Bias Claims

Oxford Economics claimed that it never tried to hide who was funding its research but that the funding source had no impact on its findings.

"…we’ve always maintained full academic control at the end of the day. The figures in the report have our name on it, no one else is [sic]. It’s our reputation, our credibility with which this [sic] figures go out into the public." Oliver Salmon, Senior Economist for Asia, Oxford Economics[15]

Oxford Economics also defended its EPS methodology in a November 2015 letter to the editor of the Macau Daily Times.

"The methodology employed for the Asia Illicit Tobacco Indicator series was developed following a thorough review of alternative methods as detailed in the wider economic literature, and all available data in the individual markets covered in the report. It is our opinion that the Empty Pack Survey is the most unbiased and robust method for estimating illicit tobacco consumption, and therefore represents the preferred method used in the Asia Illicit Tobacco Indicator series, including in Macau. The results from the Empty Pack Survey are augmented with our own conservative estimates on the volume of legal non-domestic cigarettes consumed, in order to estimate the total volume of illicit consumption in each market."[16]

TobaccoTactics Resources

Notes

  1. 1.0 1.1 Oxford Economics, About us, accessed December 2015
  2. Oxford Economics, How we work with clients, Powerpoint presentation, downloaded December 2015
  3. G. Chan, Up in smoke: illicit cigarette trade cost Hong Kong government HK$2.5b in lost tax revenues last year, study reveals, South China Morning Post, 22 October 2015
  4. International Tax and Investment Center, Sponsors Roster, accessed October 2015
  5. International Tax and Investment Center, Board of Directors, accessed October 2015
  6. ITIC, Oxford Economics. Asia-11 Illicit Tobacco Indicator 2012, 2013, accessed January 2016
  7. Southeast Asia Tobacco Control Alliance, Asia -11 Illicit Tobacco Indicator 2012: More Myth than Fact A Critique by SEATCA, 2014, accessed January 2016
  8. J. Chen, S. McGhee, J. Townsend et al, Did the tobacco industry inflate estimates of illicit cigarette consumption in Asia. An empirical analysis, Tobacco Control, 2015, 24:e161-7
  9. Asia-14, Illicit Tobacco Indicator 2013, prepared by the International Tax and Investment Center and Oxford Economics, September 2014, accessed January 2016
  10. The Economics of Tobacco Control Project, Hana Ross: Principle Research Officer and SALDRU Affiliate, University of Cape Town, accessed February 2016
  11. 11.0 11.1 H. Ross, A critique of the ITIC/OE Asia-14 Illicit Tobacco Indicator 2013, 20 May 2015, accessed January 2016
  12. A. B. Gilmore, A. Rowell, S. Gallus et al, Towards a greater understanding of the illicit tobacco trade in Europe: a review of the PMI funded ‘Project Star’ report, Tobacco Control, 2014;23:e51-e61
  13. Asia-16 Illicit tobacco Indicator 2014, Prepared by Oxford Economics, October 2015, accessed December 2015
  14. Report: ‘One in three cigarettes illegal’ findings questioned by experts, Macau Daily Times, 5 November 2015, accessed January 2016
  15. 15.0 15.1 M. U. Caraballo, Oxford Economics rejects bias claims over tobacco studies, The Manila Times, 30 September 2015, accessed December 2015
  16. S. Livermore, D. A. Witt, Oxford Economics responds to critics on illicit tobacco report, Opinion: Letter to the Editor, Macau Daily Times, 12 November 2015, accessed January 2016