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Pieter Cleppe said while legitimate businesses throughout the continent were frequently hampered by bureaucracy, criminal gangs were offering quick and easy alternatives. Crooks had been smuggling illicit tobacco under the guise of PPE, Mr Cleppe, a research fellow with the think tank Property Rights Alliance said, pointing out if organised crime were a country, it would have the third-largest GDP in the world.
EU regulation only adds to the red tape incentivising the underground economy
In Italy, one of the European countries which has been most badly impacted by COVID-19, the Mafia has capitalised by offering to loan money to businesses struggling to access funds to keep them afloat, a new analysis by the Euromonitor International think thank has indicated.
Mr Cleppe told Express.co.uk the situation needed to be seen in the context of the massive amounts of bureaucracy which governs the EU, while stressing similar problems applied throughout the entire world.
He said: “EU regulation only adds to the red tape incentivising the underground economy.
“Governments always pretend that their actions are never to blame for encouraging black markets to embed themselves in an economy, but we know this isn’t true.
“While better law enforcement is important in combating the illicit trade, consumers under economic pressure are far more likely to care about price.
“Therefore, in order to reduce the demand for illicit product, the government needs to explore fiscal measures that will allow consumer confidence to grow and avoid the temptation to spend on illicit products.”
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A much better solution would be to make it easy and inexpensive to trade legitimately, Mr Cleppe said in a pointed reference to the sorts of Brussels rules and regulations which fuelled euroscepticism in the UK.
He added: “Laws should not limit competition, regulations should not be overly burdensome, and taxation should be low.
“That would make it far less lucrative to circumvent the law.
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“More recently, and at the height of the COVID pandemic, illicit cigarettes have been smuggled under the cover of personal protective equipment (PPE), or alongside counterfeit PPE. Illicit tobacco sales channels often overlap with those of smuggled or counterfeit branded goods.
“Ultimately, the illicit tobacco trade will become increasingly integrated with the activities of organised criminal gangs, alongside illicit drugs, guns, gambling, wildlife, protection rackets, fraud and prostitution.
“Together, these gangs account for between eight percent and 15 percent of global GDP.
“If organised crime were a country, it would have the third-largest GDP in the world, behind the US and China.”
The answer to tackling the situation also lay in easing the legal burden and reducing the profit incentive for black marketeers to operate, Mr Cleppe said.
He explained: “Legal, regulated gambling, gun sales and wildlife trade can all squeeze the profit margins of illegal trade, pushing shady operators out of the market.
“Examining the dangers and risks associated with black markets leads us to the obvious conclusion: public policy should be such that the incentives for illicit trade are minimised.
“That means light-touch regulation and low and reasonable levels of taxation.
“Lightening the heavy hand of government not only minimises the scale of the illicit trade problem, but at the same time, it stimulates legal economic activity and maximises prosperity and job creation.”
Euromonitor’s report says: “The effect COVID-19 has on access to finance can be seen by tracking the effect organised crime has on the countries which the World Bank has identified as having low access to loans for businesses.
“COVID-19 has only exacerbated this financing gap that occurs in many countries across the world.
“In Italy, one of the worst scorers in the World Bank’s access to loan measure, the Mafia has taken advantage of the fact that Italian businesses are struggling by offering to purchase or loan money to businesses in exchange for future privileges.”
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