Combating the Illicit Trade in Tobacco Products in California and at the National Level through Track and Trace (T&T) Mechanisms

52 Pages Posted: 19 Mar 2018

See all articles by Michael L DeFeo

Michael L DeFeo

BOTEC Analysis, LLC

Mark Kleiman

New York University (NYU) - Marron Institute of Urban Management

James E. Prieger

Pepperdine University - School of Public Policy

Date Written: March 13, 2018

Abstract

Track and trace (T&T) of tobacco products concerns recording and monitoring the physical locations through which the goods travel in the distribution channel. T&T systems for tobacco are intended mainly to combat tax evasion and illicit diversion of goods. This study examines current T&T systems in use, particularly in California, and compares the capabilities of state and federally administered T&T systems. State T&T systems can help fight some forms of illicit trade, depending on how extensive the tracking is, but are of little apparent use against several common forms of ITTP such as interstate trafficking. A federal T&T system would have some advantages over state systems, but might be less efficient and cost effective than a system of distributed record keeping by industry entities coupled with audit and enforcement access by federal authorities. We conclude that T&T for the U.S. tobacco market does not appear to be justified to increase federal excise revenues, and its potential value in combating interstate smuggling would depend on creating the capacity to put its capabilities to practical use at the state level.

Keywords: ITTP, tobacco, enforcement, excise taxes, track and trace, tax stamp

JEL Classification: K42, I18, H26, H71

Suggested Citation

DeFeo, Michael L and Kleiman, Mark and Prieger, James E., Combating the Illicit Trade in Tobacco Products in California and at the National Level through Track and Trace (T&T) Mechanisms (March 13, 2018). Available at SSRN: https://ssrn.com/abstract=3140073 or http://dx.doi.org/10.2139/ssrn.3140073

Michael L DeFeo (Contact Author)

BOTEC Analysis, LLC ( email )

322 N. Mansfield Avenue
Los Angeles, CA 90036

Mark Kleiman

New York University (NYU) - Marron Institute of Urban Management ( email )

196 Mercer St.
New York, NY 10012
United States

James E. Prieger

Pepperdine University - School of Public Policy ( email )

24255 Pacific Coast Highway
Malibu, CA 90263
United States
3105067150 (Phone)
3105067494 (Fax)

HOME PAGE: http://sites.google.com/a/pepperdine.edu/jprieger/

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