Oxford Economics

Background

Oxford Economics was founded in 1981. It says it is “a leader in global forecasting and quantitative analysis” with a client base of more than 1,500 corporations, government organisations and universities ¹

Oxford Economics has offices across the globe with 400 staff, including 250 economists and analysts. It described itself as offering: “…best-in-class global economic and industry models and analytical tools give us an unmatched ability to forecast external market trends and assess their economic, social and business impact.” ¹ Tobacco, and specifically the illicit trade, has been a sector it has analysed since at least 2013.

Relationship with the Tobacco Industry

Work with British American Tobacco (BAT) in Pakistan

In May 2022, Oxford Economics released a BAT-funded report arguing that the illicit cigarette market in Pakistan was threatening the sustainability of the legitimate cigarette industry and the tax revenue generated by Pakistan Tobacco Company (PTC), BAT’s subsidiary in the country. Consistent with tobacco industry messaging, it argues that the rise in illicit trade was due to a sharp rise in excise rates.² The report was launched at a BAT event celebrating the 75^th anniversary of its subsidiary in Pakistan, which featured Minister of State (Petroleum Division) Musadik Masood Malik and BAT’s Head of International Trade and Fiscal Affairs Donato DelVecchio.³ News coverage noted the Oxford Economics report “celebrated PTC’s positive association with Pakistan since its inception and its contribution to the country’s GDP, taxation, employment, foreign investment, and corporate social responsibility.”³

BAT’s alternative nicotine products

In April 2021, a report published by Oxford Economics and commissioned by BAT argued that “BAT supports economic activity across the UK through its operations linked to alternative nicotine products”, estimating their contributions at £360 million to UK GDP and 7,100 jobs. It is worth noting that Oxford Economics and BAT co-branded this specific report, once again questioning the independence of the organization in delivering the work.⁴

Work with BAT in Croatia

In September 2020, Oxford Economics published a study stating that BAT had been the largest foreign investor in Croatia since 2015 (when it acquired local cigarette manufacturer TDR⁵) – it is unclear whether this specific report was funded by BAT. The publication occurred amidst talks with the Croatian government related to statements by BAT saying it was considering withdrawing from the country.⁶ BAT has since stayed on, announcing in April 2022 it would invest another €80 million to upgrade its heated tobacco products factory.⁷

The Economics of the Illicit Tobacco Trade in Malaysia

In June 2019, Oxford Economics released a report funded by BAT. In line with industry messaging, it focuses on excise taxation as the main driver of illicit trade, and deplores the closing of two major cigarette factories (run by BAT and JTI).⁸

PMI IMPACT funding

In September 2017, Philip Morris International (PMI) announced that Oxford Economics would be one of 32 projects funded directly by the tobacco company through the PMI IMPACT initiative, to develop and implement projects to tackle illicit trade and related crimes in the European Union.⁹¹⁰ According to the PMI IMPACT website, Oxford Economics’ project involves “research and analysis of the motivations of consumers to buy illegal goods, and the anti-illicit trade strategies of businesses and policy makers.”¹⁰ The project (July 2017 – July 2019) involved interviews with 150 business executives and 75 government officials – but none with public health officials. The qualitative analysis carried out as part of the project included guidance from an advisory panel, which included individuals with links to the tobacco industry, namely Peggy Chaudhry, Stefano Betti of TRACIT, Elizabeth Allen, who has worked for the International Tax and Investment Center (ITIC) and the Kangaroo Group, and Allen Bruford, advisor at ITIC.¹¹¹² The report also quotes other individuals and entities linked to the tobacco industry, including Ernesto Savona of Transcrime and Jeff Hardy of TRACIT.¹³

Economic Impact of Illicit Tobacco in Australia

In November 2021, Oxford Economics published a report commissioned by British American Tobacco Australia (BATA) on the size of the illicit tobacco market and its economic impacts. It cites several sources funded by the tobacco industry, including KPMG and Euromonitor International, and stresses the positive economic impact of BATA, Philip Morris Australia (PMA), and Imperial Tobacco Australia (ITA).¹⁴ BAT then quoted the report – along with another BAT-funded study carried out by KPMG – in its submission to the 20222-23 Federal Budget.¹⁵

Illicit Cigarette Consumption in Mexico

In September 2020, Oxford Economics produced a report on illicit trade in Mexico. The report, called “Illicit Cigarette Consumption in Mexico”, was funded by Philip Morris International (PMI), Japan Tobacco International (JTI) and British American Tobacco (BAT). Like other industry-funded reports, the number of counterfeit cigarettes was reported directly from transnational tobacco companies. This raises concerns about the veracity and bias of the data.¹⁶ A similar report, with the same name, was published in September 2021, this time funded by Mexico’s National Council for the Tobacco Industry (Consejo Nacional de la Industria Tabacalera – Conainta), whose members are BAT, JTI and PMI.¹⁷

Levant Illicit Tobacco 2019

In March 2020, Oxford Economics produced a report on the illicit trade in Egypt, Lebanon and Jordan which was commissioned by Philip Morris, Japan Tobacco International and British American Tobacco. The report estimates illicit trade in each of the countries for the past 3 years, claiming it has increased every year in each country. The report’s primary data sources were manufacturer-commissioned empty pack surveys¹⁸ The report suggests “rationaliz[ing] tax policy” to control illicit trade. This is consistent with the tobacco industry claims that higher tax leads to illicit trade.¹⁹²⁰

Asia Illicit Tobacco reports

Since 2013 Oxford Economics has produced six reports on the illicit tobacco trade in Asia (including Australia and New Zealand). These are described by the organisation as: “… an unparalleled tool for policymakers and other stakeholders, providing a comprehensive overview of illicit tobacco consumption and the impact it has on government revenues across 16 markets in Asia”²¹ Between 2013 and 2015 Oxford Economics collaborated with the International Tax and Investment Center (ITIC) to produce three reports on the illicit trade in Asia funded by Philip Morris.²²

Until 2017, ITIC was funded by the major multinational corporations including all of the leading transnational tobacco companies (TTCs): Philip Morris, Japan Tobacco International, British American Tobacco, and Imperial Tobacco.²³²⁴ Its Board of Directors also included representatives from each of these companies.²⁵

The 2016 and 2017 reports did not have a connection with ITIC but they continued to be financially supported by Philip Morris and this was acknowledged in the report. The reports and background on their writing and media articles associated with them are collated on a specific website set up by Oxford Economics²⁶

Asia 11 – Illicit Tobacco Indicator 2012

In September 2013, Oxford Economics published the findings of its Asia-11 study, 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.²⁷ 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 stated that:²⁸

• 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 in 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 Economics´ and ITIC’s estimate that 35.9% of tobacco consumed in Hong Kong in 2012 was illicit. Using data from government reports and publicly 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 2012.²⁹

Asia 14 – Illicit Tobacco Indicator 2013

In September 2014, on behalf of PMI, Oxford Economics and ITIC published Asia-14, Illicit Tobacco Indicator for 2013.³⁰
Asia-14 refers to a group of markets that include all of the aforementioned countries in the Asia-11 report plus, three additional countries, Cambodia, Laos and Myanmar.

Oxford Economics and ITIC argued 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.

Hana Ross, an expert on the economics of tobacco control, offered a critique of the PMI funded report.³¹³² Ross argued that the figures and statistics presented in the Asia-14 report were “incorrect” or “unverified/unverifiable”, and “not comparable across countries and are inconsistent with results from other studies” in the region.³² Furthermore, Ross 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 Ross’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.³³

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.³⁴
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.³⁵³⁶

Asia Illicit Tobacco Indicator 2015

In December 2016, Oxford Economics and ITIC released a 4th report on behalf of PMI, entitled Asia Illicit Tobacco Indicator 2015. The report includes data from the Asia-16 markets well as the additional market of New Zealand.³⁷

Oxford Economics Rejects Bias Claims

Oxford Economics argued 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 Economics³⁶

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.”³⁸

TobaccoTactics Resources

• International Tax and Investment Center
• International Tax and Investment Center – A History of Tobacco Industry Facilitation
• Third Party Techniques
• Lobby Groups
• Framework Convention on Tobacco Control
• PMI IMPACT