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Deloitte Touche Thmatsu Limited, commonly known as Deloitte, is a multinational network of firms providing professional services, including audit, consulting, financial advisory, risk management, and tax services. Along with KPMG, Ernst and Young (EY) and PricewaterhouseCoopers (PwC), it is one of the so-called “Big Four” accountancy giants. In 2019 Deloitte employed approximately 312,000 people in 150 countries and territories and it reported revenue of US$46.2 billion.1 Its stated purpose is ‘to make an impact that matters’.2

Relationship with the Tobacco Industry

Deloitte has a longstanding relationship with the tobacco industry including auditing individual firms and conducting analysis that is used by the industry to challenge tobacco control legislation.

Audit work for Tobacco Companies

  • Japan Tobacco International (JTI): Deloitte has provided audit services to JTI since at least 2005.34
  • J. Reynolds Tobacco Company: Deloitte were auditors for R.J. Reynolds from 1989-2000.56
  • Lorillard Tobacco Company: Deloitte audited Lorillard in the 1940s,7 1960s,8 1980s9 and until its purchase by Reynolds American in 2015.101112
  • British American Tobacco (BAT): Deloitte audited BAT at various intervals from the 1940s – 1990s.131415161718
  • Deloitte has also audited Indian tobacco companies in recent years, including Godfrey Phillips India.19

Other Business Services for Tobacco Companies

  • Philip Morris International (PMI): Deloitte’s Swiss-based global account team started an “innovation learning journey” with PMI in 2015. This involved “broad ranging discussion with PMI’s most senior executives”, seven members of PMI’s executive team attending a two-day visit to Silicon Valley in December 2015, and a subsequent workshop, led by Deloitte in January 2016, which was open to the “entire PMI executive team”.20
  • Philip Morris: In 1995 Deloitte worked for the Philip Morris Management Corporation on an email repository system.21 The firm also consulted for PM’s on “implementing a redesigned promotion, sales and fixtures process” in 1999.22
  • RJ Reynolds: In 1999 Deloitte described its services to RJ Reynolds as follows: Accounting and Auditing Services; Benefit and Health & Welfare Plan Audits; Tax Services; Information Technology Services; Valuation Services; Internal Audit Assistance; and Risk Management Assistance. Deloitte promised that its team will “apply themselves with focused intensity to promoting RJR’s continued success.”23

Producing Information to Support Tobacco Lobbying

Deloitte, like the other Big Four firms, has produced tobacco-funded studies that have been used to support industry lobbying against tobacco control regulations and are often directed at persuading policymakers and the media.

Deloitte, for example, conducted an economic impact assessment for the Association of the Hungarian Tobacco Industry, represented by Philip Morris in 1997, specifically looking at restrictions on smoking in hospitality establishments in Hungary.24 The project’s ‘terms of reference’ – i.e. before any research had been undertaken – tasked Deloitte’s Hungary office with producing “an economic impact study [that] quantifies the expected losses caused by a ban or adverse regulations on the basis of results”. It also noted that this can “follow the template of” a KPMG study for the Spanish Hotel Association. Deloitte was charged with communicating the final report to journalists and “decision-makers, including potentially to parliamentary committees.”

Tobacco Industry Funded Reports on Effects of Plain Packaging on Illicit Trade

One of the central arguments used by the tobacco industry to oppose the introduction of plain packaging regulations has been that standardised, or plain packaging will lead to an increase in illicit tobacco, principally because it will make counterfeiting easier.

This was the case in 2011 when the Australian Parliament put forward the Tobacco Plain Packaging Bill, which considered the introduction of plain packaging for tobacco products.25 Tobacco companies vehemently opposed plain packaging in Australia, arguing, among other things, that the policy would negatively impact the illicit tobacco trade in the country.

Deloitte produced multiple industry-commissioned reports on both the illicit trade and plain packaging in Australia during the plain packaging debate. For example, in 2011 it produced a report for BAT titled ‘Tobacco packaging regulation: An international assessment of the intended and unintended consequences’.26 This discussed the potential impact of plain packaging on Australia’s illicit trade and featured multiple industry commentaries on the topic (Image 1).

Image 1: A chart from Deloitte’s 2011 ‘Tobacco packaging regulation: An international assessment of the intended and unintended consequences’.

The same year, the tobacco industry front group, Alliance of Australian Retailers (AAR) also commissioned Deloitte to produce two reports on plain packaging: ‘Potential impact on retailers from the introduction of plain tobacco packaging’; and ‘Plain packaging and channel shift’.272829

Simon Chapman, a Professor of Public Health at the University of Sydney, described Deloitte’s work for the AAR as “nonsense”.30 Chapman argued that Deloitte’s report on “channel shift”, which refers to customers switching to larger outlets, such as supermarkets over small retailers, had set out to verify a “foregone conclusion”. He suggested that “push polling” may have occurred, whereby interview participant’s opinions are potentially manipulated by the questions that they are presented with. Another 2011 report, titled ‘Illicit Trade of Tobacco in Australia’ was commissioned by BAT Australia, PMI, and Imperial Tobacco Australia, and it suggested that in Australia all of the 15.9% of smokers who had bought illicit tobacco in the last year were using approximately 25 illicit cigarettes for 365 days of the year.31

Deloitte’s report also claimed that: “the increase in the trade of illicit tobacco has occurred concurrently with some material changes to the regulatory and taxation regime including …The federal government intends to legislate for the introduction of plain packaging of all tobacco products during the course of 2011”.

Just days later, BAT issued the following press release reinforcing the message on illicit tobacco: “British American Tobacco Australia today congratulated Customs and Border Protection on their hard work for seizing 2.5 million illegally imported counterfeit cigarettes in Brisbane. Unfortunately, 2.5 million counterfeit cigarettes (equal to 2500 kg) are less than 1% of the total amount of illegal tobacco making its way into Australia each year”.32

The tobacco companies’ campaigning websites also claimed that plain packaging would increase smuggling and illicit trade by making cigarettes easier and cheaper to counterfeit.

Australia’s Home Affairs Minister, Brendan O’Connor, who was responsible for customs issues, responded by accusing the powerful tobacco lobby of scaremongering to protect its commercial interests. “It is baseless to claim that one in six smokers consuming illegally imported tobacco. Big tobacco regularly quotes from reports that it commissions itself – rather than the independent research – because independent research does not back its claims,” he said.33

Officials from the Australian Customs and Border Protection Service also outlined their concerns regarding the accuracy of the claims made in Deloitte’s report. They noted that the size and methodology of the survey that the firm used to estimate the size of Australia’s illicit tobacco market were not revealed and that it was “potentially misleading” to identify organised crime gangs as the fourth largest tobacco ‘player’ in Australia.34

Deloitte released an updated version of another tobacco industry-funded report on the ‘Illicit trade of tobacco in Australia’32 in 2012. This was critiqued by Cancer Council Victoria (see below) along with the original report of the previous year. Findings from Deloitte’s reports on illicit tobacco in Australia have been used to support claims in similar reports by other firms, such as [] KPMG’s 2015 report on Australia’s illicit tobacco trade.35

Image 2. Snip taken from CCV’s critique, comparing Deloitte’s estimations with findings from the National Drug Strategy Household Survey, 2011.

Cancer Council Victoria Critique of Reports

The non-profit cancer charity, Cancer Council Victoria (CCV) published critiques of Deloitte’s 2011 and 2012 reports on the illicit tobacco trade in Australia. In its review of the 2011 report, CCV outlined how Deloitte’s findings had been used by the industry to oppose plain packaging:

“Deloitte claimed that the size of the illicit tobacco market in Australia is 15.9%, a figure widely quoted by tobacco companies and since included in A4+ sized newspaper advertisements aiming to discourage members of the Australian Parliament from supporting legislation to mandate plain packaging,” the critique said.36

The CCV analysis discussed multiple methodological problems with the survey data that the report is based on and outlined how some of its findings were misinterpreted by Deloitte. CCV compared Deloitte’s findings to a Government survey which found that only 1.2% of smokers used illicit tobacco products half the time or more.37

CCV’s critique of the 2012 Deloitte report identified “much (of) the same problems” regarding the quality of the data reported on, identifying high respondent drop-out rates and a lack of methodological transparency. It also outlined problems related to how the report quantifies counterfeit and contraband cigarettes, due to it adding the two categories together rather than accounting for the significant level of overlap.

It said that adding the figures for counterfeit and contraband together creates a higher estimate of overall illicit tobacco use as it does not account for the fact that most survey respondents would have been referring to the “same product and set of purchases”.38

CCV referred to the definition of contraband cigarettes that Deloitte used in its 2012 report: “According to the definition included in the (Deloitte) report on page 2, contraband cigarettes can include counterfeit as well as genuine cigarettes that are imported without payment of taxes.”

CCV noted that this definition allowed for an overlap, whereby most, but not all contraband (smuggled cigarettes where domestic duty is not paid), are counterfeit (cigarettes that have been manufactured without the authorisation of the brand owners). Despite this, Deloitte added the two categories together as if they were completely independent, thus inflating the findings (Image 3).

Image 3. An explanation of the errors in Deloitte’s quantification of use of contraband/counterfeit cigarettes, taken from CCV’s 2012 critique.

Industry Funded Reports used to Lobby UK Government Over Plain Packaging

The UK government’s first public consultation on the plain packaging of tobacco products took place between 16 April 2012 and 10 August 2012 and saw significant industry opposition to plain packaging. See: 2012 Consultation.

BAT, Imperial Tobacco, JTI, & PMI all submitted responses to the consultation, with each referring to at least one of Deloitte’s industry commissioned reports.

BAT’s submission cited ‘Tobacco packaging regulation: An international assessment of the intended and unintended impacts’, JTI’s submission referred to the two AAR-commissioned reports in order to portray retailer opposition to standardised packaging, and Philip Morris’ submission also referred to Deloitte’s work for the AAR to highlight extensive retailer opposition to standardised packaging (See image 4).

Out of the four responses, Imperial Tobacco’s Submission to the 2012 UK Consultation on plain packaging cited Deloitte’s industry commissioned research the most. Imperial Tobacco referred to the report on ‘intended and unintended impacts’ as well as to the two AAR-commissioned reports. The company’s submission also attempted to defend Deloitte’s estimates, arguing that a study which “is widely referred to by anti-tobacco lobbyists in response to the Deloitte reports”, “misrepresents” Deloitte’s view.

Image 4. Snip of PMI citing Deloitte’s AAR reports in its consultation submission.

Controversies Outside of the Tobacco Industry

Selling tax avoidance

Deloitte, like the other Big Four companies, has a history of developing and marketing complex tax avoidance schemes for clients. For example, following the demise of energy firm Enron, a US Senate report found that Deloitte played a key role in developing tax avoidance strategies for the company. The 12 tax avoidance strategies developed by Deloitte and other business advisers helped Enron save around $2bn in taxes.39

Another Deloitte scheme was sold to betting firm Ladbrokes, which involved two subsidiaries deliberately transacting with each other in order to generate a tax loss in one of them, but the group suffering no real loss overall. A Ladbrokes tax director told the court that he had “been approached by Deloitte with a proposal for a tax planning opportunity”. Another Deloitte scheme to enable bankers to avoid income tax and National Insurance contributions on their bonuses via offshore entities was declared unlawful with the judges saying that the scheme “had no business or commercial rationale beyond tax avoidance”.40

Audit failures

Deloitte has been investigated and fined for the poor quality of audits it has conducted. For example, in 2018 it agreed to pay a $149.5m settlement over its audits of the mortgage lending firm Taylor, Bean & Whitaker (now defunct), with the US Department of Justice alleging that “Deloitte’s audits knowingly deviated from applicable auditing standards”.41 In 2019 Deloitte was fined £4.2m by the UK accounting watchdog and severely reprimanded for its audit of Serco’s Geografix division.42 In 2020 Deloitte was facing a record £15million fine for “serious and serial failures” in its audits of the technology group Autonomy, which was at the centre of one of the biggest accounting scandals in UK corporate history.

Allegations of overcharging

In 2019, South Africa’s state power firm Eskom started legal action against Deloitte over allegedly overpriced contracts. Eskom’s chairman alleged that Deloitte was granted contracts “five times more than its competitors” and that this “shows that Deloitte engaged in activities that were unfair, inequitable, non-transparent and uncompetitive”. Deloitte disagreed with and disputes Eskom’s allegations.43

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