Download the report: http://files.lrinka.lt/Tyrimas_kontrabanda/Report.pdf
Smuggling and consumption of illegal goods is justified by a large share of Lithuanians, Latvians and Estonians. 62% of Lithuanians, 51% of Latvians and 31% of Estonians, completely justify or rather justify smuggling and consumption of illegal goods such as cigarettes, alcohol products and fuel. Similarly, a large share of population in all three Baltic States thinks that the use of smuggled and illegal goods such as cigarettes, alcohol products and fuel has increased in 2012.
This was shown by Lithuanian Free Market Institute (LFMI) representative opinion poll across all three Baltic States. It was conducted in January 2013 by “Spinter research” (in collaboration with “Aptauju centrs SIA” and “Turu-uuringute AS”). 3033 permanent residents of Lithuania, Latvia and Estonia were questioned.
“Public opinion regarding the consumption of illegal goods is very important, because citizens themselves are the consumers. As we can see, in Lithuania and Latvia smuggling and consumption is justified more than in Estonia. Only 31% of Estonians justify smuggling, while the share of those who do not justify is significantly larger (62%),” claim Vytautas Zukauskas, LFMI senior expert and chief researcher.
Consumption of illegal goods during 2012 has increased
Most Latvians and Lithuanians think that in 2012 consumption of illegal goods has increased, as indicated by the research.
59% of Lithuanians think that the consumption of cigarettes in 2012 has increased. Similar numbers were in Latvia – 53% of respondents think so. In Estonia, however, it only reached 37%. Turning to illegal fuels, 60% of Lithuanians think that the use of illegal fuels in 2012 has gone up. In Latvia 47% of people claims this and in Estonia 29% of citizens do so. 50% of Lithuanians think that the use of illegal alcohol and its products has increased; 48% of Latvians and 31% of Estonians think this way.
Taxes (excises) and decreasing possibilities to afford legal goods – main reasons for smuggling
A large share of population in Lithuania, Latvia and Estonia claim that increasing product prices, small and decreasing income and weakening possibilities to afford legal goods is one of the main reasons for smuggling. 46% of Lithuanians, 61% of Latvians and 78% of Estonians thinks this is the main reason.
Another import reason is the ability to profit from large price differences between the Baltic and neighboring states, in which there are no mandatory high excise taxation from EU for fuel, alcohol products and cigarettes. Price differences as a one of the major reasons was mentioned by 55% of Estonians, 50% of Latvians and 46% of Lithuanians. Other important reason is corruption – a quarter of Lithuanians and Latvians thinks so, whereas only 10% of Estonians think of it.
Incentives to look for goods in illegal market and participate in the shadow economy can be affected not only because of taxes, but as well by additional regulations, i.e. bans on certain products, the study results proved. One example of such regulation is European Commission Tabaco Directive proposal introduced in 2012; it was proposed to ban the sale of different flavor cigarettes and to control the size and shape of the cigarettes. In the survey of the population attitudes towards the smuggling and consumption of illegal goods respondents were asked, weather a ban to sell different flavor and shape cigarettes (e.g. mint and slim) would encourage people to look for such products in the illegal market. This question helps to evaluate the effect of new regulation on the illegal tabaco market. The research results revealed, if different flavor and shape cigarettes were banned, a large part of the Baltic States citizens, who are smoking this kind of cigarettes now, would be looking for them in the illegal market.
Baltic States citizens agree – it is important to reduce taxes when combating smuggling
According to citizens of Lithuania, Latvia and Estonia, the most effective measure to combat smuggling and consumption of illegal is to lower taxes, in order to decrease prices. 83% of Lithuanians, 84% of Latvians and 76% of Estonians say that the most effect measure is to reduce taxes (excise). In all three Baltic States a bigger share of respondents (bigger by more than 60%) thought of it as an effective measure than ineffective.
Reducing government regulation, which interferes with starting and doing business, by Lithuanians and Latvians was named as the second effective measure when combating the spread of illegal goods. Meanwhile, Estonians think that the second most important measure is to strengthen border control.
“People all across the Baltics states think that the most effective ways to combat the spread of illegal goods are ones which are directed towards reducing incentive to operate in the shadow economy, i.e. to lower price of excise goods, so that the trade of these goods would be less profitable. Administrative or increased punishment measures are seen as less effective,” said Vytautas Zukauskas.
Representative opinion poll research in Lithuania, Latvia and Estonia by the order of LFMI in January 2013 was conducted by “Spinter research”, which questioned 3033 permanent residents of Lithuania, Latvia and Estonia: 1004 in Lithuania, 1026 in Latvia and 1003 in Estonia. Age of respondents ranges from 18 up to 75 years old. Across three countries the survey was conducted for the second year. Lithuanian Free Market Institute (LFMI) is conducting surveys of population attitudes towards smuggling and use of illegal goods since 2004.
