 "Illicit trade caused Rs 39,239 cr loss to government exchequer: Ficci")
The report titled 'Illicit Market: A Threat to Our National Interest', is a quantitative study evaluating the impact of illicit markets on various economic aspects in the manufacturing industry including sectors like FMCG (fast moving consumer goods) packaged foods and personal goods, computer hardware, automobiles, mobile phones, tobacco and alcohol and media and entertainment.
The loss to the government is inclusive of both indirect and direct taxes- the indirect taxes component is Rs 34,020 crore and direct taxes is Rs 5,218 crore. The study has also discovered that during the course of two years from 2011-12 to 2013-14, revenue loss to the government has grown-up exponentially by Rs 13,049 crore, an increase by 49.8 per cent.
Amongst the various sectors, the maximum revenue loss to the exchequer on account of counterfeiting and illicit trade is attributed to tobacco products at 23 per cent, estimating a revenue loss of Rs 9139 crore.
Odisha has seen a significant growth in illicit trade, particularly in respect of tobacco products in the past couple of years.
"It (Odisha) is one of the fastest growing markets for illegal cigarettes and alcohol in the country. Illegal cigarette industry is estimated at more than 20 per cent of the total cigarette market in the state. The supply of legal cigarettes shows a decline, the illegal players have taken over this market and is growing at a higher rate. In case of alcohol, the illegal market is growing significantly in value and much higher in quantity especially for IMFL (India Made Foreign Liquor) and imported liquor. These two sectors are amounting to more than hundreds of crores in loses to the Odisha government", the report said.
Deep Chand, advisor, Ficci Cascade said, "In the past few decades, leading intelligence and law enforcement agencies around the world have found conclusive evidence of the increasing involvement of terrorist organizations in counterfeiting, piracy and smuggling activities to fund their activities. While several counterfeiting outfits are transferring portions of their proceeds to terrorist organizations, some of these are set up for the sole purpose of financing terrorism. The need of the hour is tangible actions to increase enforcement and to impose increased punishments. This is imperative to reassure legitimate business owners and consumers that the government is serious about protecting right owners which, in turn, would elicit greater support for government policies."
The study has established a relationship between high taxes and availability of illicit products. High tax rates tend to exacerbate illicit markets by creating greater demand for cheap and counterfeit substitutes.