Oxford Economics

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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

PMI IMPACT funding

In September 2017, 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.23 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.”3

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.4

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 source was used manufacturer-commissioned empty pack surveys5 The methodology of developing the report is questionable though, as the report is not only funded by the tobacco industry, but they are also the ones identifying what products are illicit in the analysis done for this report. The report, as similar to the tobacco industry approach, refers to “rationalize tax policy” among recommendations for controlling illicit in consistence with the tobacco industry claims that higher tax leads to illicit trade.

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”6 Until the 2016 report it 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.7

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.8 9 Its Board of Directors also included representatives from each of these companies.10

The 2016 and 2017 reports did not have a connection with the 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 Economics11

Asia 11 – Illicit Tobacco Indicator 2012

In September 2013, Oxford Economics publishd 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.12 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:13

  • 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 Economics´ 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 2012.14

Asia 14 – Illicit Tobacco Indicator 2013

In September 2014, on behalf of PMI, Oxford Economics and ITIC published Asia-14, Illicit Tobacco Indicator for 2013.15
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 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.

Again, SEATCA offered a critique of the PMI funded report undertaken by Dr Hana Ross, an expert on the economics of tobacco control.1617 SEATCA argued 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.17 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.18

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.19
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.2021

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.22

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 Economics21

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.”23

TobaccoTactics Resources

References

  1. abOxford Economics, About us, accessed April 2020
  2. Philip Morris International, Philip Morris International Announces First Round Of Projects To Be Funded Through PMI IMPACT, A USD 100 Million Global Initiative To Fight Illegal Trade, 7 September 2017, accessed September 2017
  3. abPMI IMPACT, Selected Projects: First Funding Round , 2017, accessed September 2017
  4. Oxford Economics, Illicit Cigarette Consumption in Mexico, September 2020, accessed September 2020
  5. Levant Illicit Tobacco 2019, Report ,March 2020,accessed April 2020
  6. Oxford Economics, Asia Illicit Tobacco ,undated, accessed April 2020
  7. 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
  8. International Tax and Investment Center, Sponsors Roste , accessed October 2015
  9. P. McClean, Big Tobacco lobby group quits smoking industry, ”Financial Times”, 19 May 2017
  10. International Tax and Investment Center, Board of Directors, accessed October 2015
  11. Asia Illicit Tobacco Indicator, [1] undated,accessed April 2020
  12. ITIC, Oxford Economics. Asia-11 Illicit Tobacco Indicator 2012, 2013, accessed January 2016
  13. Southeast Asia Tobacco Control Alliance, Asia -11 Illicit Tobacco Indicator 2012: More Myth than Fact A Critique by SEATCA, 2014, accessed January 2016
  14. 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
  15. Asia-14, Illicit Tobacco Indicator 2013, prepared by the International Tax and Investment Center and Oxford Economics, September 2014, accessed January 2016
  16. The Economics of Tobacco Control Project, Hana Ross: Principle Research Officer and SALDRU Affiliate, University of Cape Town, accessed February 2016
  17. abH. Ross, A critique of the ITIC/OE Asia-14 Illicit Tobacco Indicator 2013, 20 May 2015, accessed January 2016
  18. 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
  19. Asia-16 Illicit tobacco Indicator 2014, Prepared by Oxford Economics, October 2015, accessed December 2015
  20. Report: ‘One in three cigarettes illegal’ findings questioned by experts, Macau Daily Times, 5 November 2015, accessed January 2016
  21. abM. U. Caraballo, Oxford Economics rejects bias claims over tobacco studies, The Manila Times, 30 September 2015, accessed December 2015
  22. ITIC, Oxford Economics. Asia Illicit Tobacco Indicator 2015, 2016, accessed July 2017
  23. 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