Illicit Trade in Cigarettes Higher taxes and prices create greater incentives for traders to enter the illicit market or for consumers to legally avoid Rucaparib mechanism taxes since the higher taxes and prices increase the ��rents�� they can achieve by evading or avoiding taxes. However, many other commodities that are not specially taxed also suffer from a large illicit market (e.g., music, films and, to a lesser extent, clothing, and medicines). Thus, factors other than taxes also contribute to the illicit trade. These include, for example, the value to weight ratio or the value to size ratio of the commodity, border and customs enforcement, and the existence of organized crime and corruption.

Furthermore, tax increases do not necessarily result in price increases or price increases of the same magnitude (see the section ��Industry Efforts to Influence Tax Policy and Industry Pricing Strategies��); thus, it is important to consider that it is also the tobacco industry��s pricing policies that influence the ��rents�� achieved by avoiding or evading taxes. Generally, the focus of the tax avoidance and evasion literature has been on HICs, primarily because taxes and prices are considerably higher in HICs, but also because the required data are more likely to be available in HICs, relative to LMICs. Furthermore, the problem of tax avoidance and evasion has been more thoroughly documented in HICs, most probably owing to data availability. Higher per unit taxes in HICs mean that government revenue losses are significantly higher, creating a greater incentive for governments to investigate and reduce tax avoidance and evasion.

Illicit trade is, however, a global problem and evidence of tobacco industry collusion in cigarette smuggling in Asia, Africa, the Middle East, and the former Soviet Union has emerged via the industry��s own documents that it was forced to release through litigation (Collin, LeGresley, MacKenzie, Lawrence & Lee, 2004; LeGresley et al., 2008; Nakkash & Lee, 2008). These documents show the various ways the tobacco industry use cigarette smuggling, including as a means of entering closed markets in order to establish a brand presence (Gilmore & McKee, 2004a, 2004b; Gilmore, Collin, & Townsend, 2007; Lee & Collin, 2006). Despite common features, including tobacco industry involvement, the well-known cases have unique narratives.

For example, in the United States, tax avoidance and evasion has been made easier by state level taxation, where each of the 50 states (and the District of Columbia) apply their own, often unique, tax regimes. Some city Anacetrapib and county authorities apply their own taxes on top of the state taxes. Thus, consumers and illicit traders have incentives to cross state borders to purchase cigarettes for their own consumption or for resale. Making matters more complicated is the availability of tax-free cigarettes from Native American Reservations (this problem is unique to the United States and Canada).