You might not realize it, but counterfeit products have a damaging effect on businesses, the economy, and public services. Counterfeiting can even cause serious health risks. Here is a look at how counterfeit items are creating significant global problems.
Counterfeit Goods Damage Economic Growth and Can Cause Job Losses
People tend to buy counterfeit goods for one sole reason: they are cheaper than the genuine articles. But when people buy counterfeit products, it means the legitimate companies lose out. The people selling counterfeits are stealing legitimate companies’ intellectual property, not paying taxes, and not complying with any quality standards and regulations. With such unfair illegal competition, it displaces legitimate businesses and that has a knock-on effect on customers and economic growth. Sometimes it can even cause companies to let go of employees. In fact, estimated job losses due to the knock-on effect of selling counterfeit items are estimated to be between 4.2 million and 5.4 million by 2022.
Both the manufacturing and selling of counterfeit goods are illegal and authorities are clamping down on operations more and more. Here is a warning tale for counterfeit manufacturers: a sixty-five-year-old South Carolina man was arrested last year after officers seized a whopping $342,000 worth of counterfeit products from his home, including fake trademarked items supposedly from the likes of Nike, Harley-Davidson, and Chevy, as well as the machinery used to make the goods.
Counterfeit Products Significantly Affect Public Services and Local Infrastructure
To see why counterfeit products can create global problems, you need to look at the bigger picture. Legitimate businesses provide essential tax revenue that governments use for important things like schools and roads. Companies not only pay direct transfers like income tax of employees and corporate tax. They also pay the taxman through sales taxes. When you look at how much counterfeit products have affected sales taxes, you will probably be very surprised. It is estimated that sales tax represents between 70% and 90% of the financial losses the displacement of genuine economic activity brings. According to a report by the BASCAP, the reduction in sales taxes in the US as a result of displacement could be as much as $89 billion per year. Just think how many public services cannot be implemented because of billions of missing dollars!
It is not only that the funds for things like schools and hospitals are not available. The problem is also that the lack of funds affects basic infrastructures that create fewer job opportunities. So, think twice before you purchase a counterfeit item.
Counterfeits Can Cause Serious Health Risks
Counterfeit goods cover all kinds of products, from clothing and watches to perfumes and beverages. When the items are things like drinks and aftershaves, the counterfeit products can cause serious potential health risks because they have not been tested and approved by official bodies.
If you buy any counterfeit item that you ingest or place on your skin, you are taking a big risk. For example, in Russia in 2012, more than 17,000 deaths were thought to be caused by people drinking counterfeit alcoholic drinks with hazardous ingredients. And counterfeit medications are a big problem in developing nations. According to a report by the American Society of Tropical Medicine and Hygiene, in the sub-Saharan region of Africa in 2013, over 120,000 children under the age of five died due to taking counterfeit anti-malarial medication.
Counterfeiting Provides Organized Crime with More Funds
Counterfeiting is a criminal activity. But it is not only the crime itself that is a problem. It is also about how that criminal activity has a knock-on effect in the criminal underworld.
Counterfeiting supports wider criminal activities by providing funds for more serious crimes. At the end of the day, the more funds criminals get through things like counterfeiting, the more criminal organizations are strengthened.