Transcript The economic impacts of counterfeiting

The economic impacts of counterfeiting
Presentation for BASCAP congress 2009
02 December 2009
Understanding economic costs is complex
● Clear objectives
□ Understanding costs to consumers
and government
● Robust methods
□ Bottom up, start with the micro level
● Use transparent assumptions
and best data
● Transparent
results
● Results which
follow from
the data
● Conservative
results
□ Always conservative
…we developed simple bottom-up model
Overall approach
● Four sectors:
● Five outcomes
□ UK
□ Food and drink
□ Tax and benefits
□ Mexico
□ Luxury goods
□ Employment
□ Pharmaceuticals
□ Health
□ Software
□ Crime
● Two countries:
□ FDI
● Grossed up to economy level
● Grossed up to G20
…methods experimental, results preliminary
● Objectives
● Methods
● Results
OECD recognises four issues
● Counterfeit and pirated goods moving through
international trade
● Domestically produced and consumed counterfeit
and pirated goods
● Pirated digital products distributed via the internet
● Broader economy wide effects
Trying to measure loss to economy
Proportion of counterfeit
goods consumed is the
counterfeiting rate
Measuring the effect of
counterfeit consumption
on domestic production
Our analysis
is focused
here
The impact on domestic
production traced
through to tax receipts,
benefit payments
Domestic
production
Domestic
consumption
Imports
Domestic
Consumption
production
of counterfeits
Tax lost,
benefit paid
● Objectives
● Methods
● Results
Aim for best estimate based on bottom up modelling
● Be clear
about
counterfactual
● Estimate
level of
counterfeiting
● Luxury goods
● Food
● Pharma
● Software
● Model
economic
costs
● Impact on
firm output
and pricing
…not a macro model
Five modules
Industry
impact
Health
Total
costs
FDI
Tax,
benefits
Crime
… make up the economic model
The UK industry impact calculation
● Assume only 2% of food and luxury
goods counterfeit
•
40% of those purchasing counterfeit luxury
goods would shift to real thing
● Data on industry specific turnover,
profits and employment
● Unemployment data
● Reduced
industry
turnover
● Reduced
profits
● Job losses
and long term
unemployment
□ By length of time unemployed
…feeds into tax and benefit calculations
Tax and benefits module
● Estimated
impact on:
□ Turnover
● Apply rates of:
□ Sales tax
□ Profits
□ Corporation
tax
□ Employment
□ Income tax
● Estimate
□ Additional
benefit
payments
● Estimated reduction in tax receipts
● Estimated increase in benefit payments
Crime, health and FDI
Crime
Health
FDI
● Total cost in UK
€150 bn
● Calculated for G20
● NBER estimates
poor IPR
enforcement
reduces exports
from poorer
countries by 20%
● 3.6% GDP
estimate for
Mexico
□ Can assume
counterfeiting
increases it by
small percentage
● Review 30+
studies of deaths
related to
counterfeiting
● Develop annual
estimate of deaths
– 3,0000
● conservative value
to each premature
death
□ We assume 5%
impact on Mexico
● Objectives
● Methods
● Results
UK and Mexico results
UK
● Four sectors:
Mexico
● Four sectors
□ €500 million in lost taxes
□ €220 million lost taxes
□ 15,000 jobs lost,1,200
long term
□ 10,000 jobs lost, 500 long
term
● Economy wide
● Economy wide
□ €4 billion lost tax
□ €1.4 billion lost tax
□ 380,000 jobs lost
□ 480,000 jobs lost, 26,000
long term
□ 31,000 long term
□ 520 million tax lost from lost
FDI
Illustrative extrapolation to G20
● Extrapolate tax losses
□ With 50% discount
● Extrapolate employment losses
● €20 billion cost for every 1% increase
in crime rate caused by counterfeiting
● Perhaps 3,000 lives lost from
exposure to counterfeit food and
medicines
● €60 billion lost
in tax revenue
● 2.5 million
jobs lost,
160,000 long
term
● Very big
economic
costs of crime
and health
A lot more still to do to understand economic effects
● Improve
methodology
● Improve data
● Better
evidence
● Better policy
● Carry out
CBAs of
regulatory
responses
● Implement in
other sectors
and countries
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