BAT says Mexico's tax hike on cigarettes spurs pirate brands

British American Tobacco Plc said Tuesday that the recent increase in Mexico's cigarette tax opened the door to around 100 illegal brands.
"As we expected, in just three months more than 100 pirate brands appeared that do not comply with the minimum requirements of the law - judging by their price of under 25 pesos ($2) for a pack of 20 cigarettes, we doubt their 'legality,'" BAT said in a communique to Mexican lawmakers.
Last November, the Mexican Congress passed a tax hike of 350 pesos ($29) for every 1,000 cigarettes - meaning a tax of 7 pesos (58 cents) on every pack of 20.
Added to other taxes, most brands in Mexico boosted the price of a pack by 8 pesos (66 cents).
"Starting in 2011, the value of 14 out of every 20 cigarettes in a pack goes to paying the taxes," BAT said.
"In different areas of the country "the sales of contraband cigarettes have reached a market share of up to 15 percent," the London-based giant said.
If the presence of pirate brands goes national, "it will represent an approximate loss in tax revenues of 7 billion pesos ($583.3 million) for 2011," the company said.
In that regard, BAT asked that "a common front" be formed to combat the illegal cigarette market in Mexico.
The company also asked Mexican authorities "to make use of the laws and apply them equally to all," and asked stores "not to sell products that break the law."
Finally, the firm asked consumers "not to risk buying and smoking cigarettes of doubtful origin."
BAT distributes in Mexico such brands as Dunhill, Camel, Pall Mall, Lucky Strike, Kent, Montana and Raleigh, and has roughly 30 percent of a market dominated by Philip Morris, which has around 70 percent.