Tuesday 27 September 2016

Revealed: Black market trading cost economy €2.5bn last year

Published 11/05/2016 | 02:30

Black market trading is estimated to have cost the economy close to €2.5bn last year.

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Almost €800m of that is a direct loss to the Exchequer, according to a report by consultants Grant Thornton.

The study focused on alcohol, tobacco, fuel, pharmaceuticals, digital piracy and other product counterfeiting. The report said there was little sign of illicit trade abating.

"Illicit trade is continuing to develop in Ireland and is becoming a real threat to the Irish economy," Grant Thornton said.

"The estimates that we have provided for the sectors covered in this report show that illicit trade could be costing right holders as much as €1.56bn per annum and the Irish Exchequer circa €788m per annum."

Price, the report said, remains the main driver of illicit trade. Alcohol products are prime targets for counterfeiters because of their brand value and the high tax and excise attached to them.

Spirits are the most common category of counterfeit alcohol, but there are also indications that counterfeit wine is also becoming widely available.

"In an effort to increase margins publicans may purchase counterfeit products at cheaper prices, not realising that they are not genuine," according to the report.

"Unsuspecting consumers looking for a bargain may have trouble distinguishing a genuine product from one that is counterfeit and potentially harmful.

"Counterfeit alcohol has been detected in bars and off licences in Ireland, often having been made locally at illegal bottling plants." The report pointed out that cross-border efforts continue to try to stamp out the issue. Illicit alcohol seizures have increased by 100pc from 275 in 2010 to 550 in 2014.

The study points out that the introduction of the carbon tax in the 2010 Finance Act pushed up the price of fuel, with the black market seeing increases in the sale of coal, peat briquettes and sod peat as a result.

The authorities, however, have been unable to estimate the size of the market in solid fuel smuggling, the report said.

A key driver for the illicit trade in tobacco products is the level of excise duty, the report said. "Criminals are attracted to the high profitability of this market as taxation policies across different jurisdictions give rise to opportunities for illegal traders to make profits by not paying domestic rates of duty," the study said.

In Budget 2016, the excise duty on a packet of 20 cigarettes rose by 50 cent (including VAT). Each pack now costs €10.50 compared to €8.55 in 2010, fuelling concerns that trade in this area will continue.

The study said that the spread of e-commerce has helped facilitate the sale of pharmaceuticals on the black market. Cross-border travel also helps facilitate it.

But it added: "Illicit trade in medicines in Ireland is different from some of the other areas discussed in this report.

"For the most part the illicit trade in medicines does not displace legitimate trade. This is because most of the illicit market which we see in Ireland does not qualify for prescription medicine supply and would not be available for purchase."

The last area looked at is digital piracy. This includes audio-visual piracy, software piracy, and the threat of other electronically transmittable IP.

"Digital piracy is perceived to be a victimless crime as little to no financial gain arises from the distribution of digitally pirated products online," Grant Thornton said. "Due to the high numbers engaging in illegal downloading it is very difficult and uneconomical to pursue individual offenders."

Irish Independent

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