Rising tobacco taxes risk boosting black market, warns PMI executive

GEISHA KOW­LESSAR-ALON­ZO

Wash­ing­ton DC

In­creas­ing tax­es on to­bac­co and re­lat­ed prod­ucts may un­in­ten­tion­al­ly in­cen­tivise a surge in the il­lic­it trade mar­ket with­in Trinidad and To­ba­go, says Matías O’Far­rell, vice-pres­i­dent of cor­po­rate af­fairs for Latin Amer­i­ca and Cana­da at Philip Mor­ris In­ter­na­tion­al (PMI).

Speak­ing to Guardian Me­dia yes­ter­day at day one of Tech­no­va­tion 2026 at the Hamil­ton Ho­tel in Wash­ing­ton DC, O’Far­rell em­pha­sised that while il­lic­it trade is a glob­al scourge, it is not unique to this coun­try.

As of Oc­to­ber 2025, Trinidad and To­ba­go in­creased its ex­cise du­ties on to­bac­co prod­ucts by 100 per cent.

O’Far­rell high­light­ed that gov­ern­ments of­ten face a del­i­cate, high-stakes bal­ance when at­tempt­ing to reg­u­late and tax to­bac­co prod­ucts, not­ing that reg­u­la­to­ry frame­works vary sig­nif­i­cant­ly across the Caribbean and glob­al­ly.

“You need a cer­tain pack­ag­ing for one place, then there’s a ban in an­oth­er, tax­es dif­fer,” O’Far­rell ex­plained, un­der­scor­ing how this reg­u­la­to­ry patch­work cre­ates com­plex op­er­a­tional hur­dles for both com­pa­nies and con­sumers.

Build­ing up­on these glob­al com­plex­i­ties, O’Far­rell iden­ti­fied three crit­i­cal pil­lars for the Trinidad and To­ba­go mar­ket, which he de­scribed as an im­por­tant play­er for PMI.

First, he ar­gued that tax dif­fer­en­ti­a­tion must re­flect the rel­a­tive harm of var­i­ous prod­ucts, with high­er-risk items sub­ject to steep­er levies.

“Num­ber one, I would say, is tax dif­fer­en­ti­a­tion for this type of al­ter­na­tives. I think that the riski­er or the worse harm it does, it has to be taxed high­er,” he said.

Sec­ond, and per­haps most press­ing, is the ne­ces­si­ty of en­sur­ing that tax­a­tion and reg­u­la­to­ry rigour do not in­ad­ver­tent­ly dri­ve con­sumers to­ward the black mar­ket.

“The sec­ond im­por­tant thing is il­lic­it trade. I think that Trinidad and To­ba­go is not ex­empt­ed as all the rest of the world. The mo­ment that you in­crease tax­es, or you put cer­tain tough reg­u­la­tions that make it dif­fer­ent for the con­sumer to ac­cess those prod­ucts, you will see il­lic­it trade surge, for sure,” O’Far­rell stat­ed.

Fi­nal­ly, he reaf­firmed that pro­tect­ing mi­nors from ac­cess­ing these prod­ucts re­mains a foun­da­tion­al pri­or­i­ty for the com­pa­ny.

O’Far­rell re­frained from of­fer­ing di­rect pol­i­cy pre­scrip­tions, de­fer­ring in­stead to the ex­per­tise of lo­cal of­fi­cials, stat­ing: “I think specif­i­cal­ly Trinidad and To­ba­go, I would say that they have a high cal­i­bre of and has al­ways had a high cal­i­bre of reg­u­la­tors, min­is­ters of fi­nance, and even, you know, Par­lia­ment, et cetera. What I can tell you is what I’ve seen in oth­er coun­tries when we dis­cuss tax in­creas­es that go over a cer­tain lev­el,” he said.

O’Far­rell al­so point­ed to in­ter­na­tion­al cau­tion­ary ex­am­ples where rapid tax es­ca­la­tions led to un­in­tend­ed con­se­quences.

Coun­tries such as Ecuador, Pana­ma, France, Mex­i­co, and Brazil have all ex­pe­ri­enced sig­nif­i­cant spikes in il­le­gal trade when tax­es crossed crit­i­cal thresh­olds or were raised too ag­gres­sive­ly; in sev­er­al in­stances, these poli­cies re­sult­ed in de­creased gov­ern­ment rev­enue as con­sumers mi­grat­ed to cheap­er, un­reg­u­lat­ed al­ter­na­tives.

“When you go over a cer­tain lim­it or when you in­crease tax­es too high in a short pe­ri­od, you see il­lic­it trade surge, and you see col­lec­tions fall. That’s some­thing that is nor­mal be­cause con­sumers start look­ing for oth­er al­ter­na­tives,” O’Far­rell added.