Contraband Cigarettes Increasing in Europe

Jul 18, 2012
NACSOnline

A new report found that one in 10 cigarettes sold in the European Union was illegal.

BRUSSELS, Belgium – Over the years, Europe has steadily restricted smoking and jacked up cigarette taxes, but that hasn’t stopped contraband cigarettes from surging, the Wall Street Journal reports. A new report by KPMG found that one in 10 cigarettes were sold illegally in the European Union in 2011.

Also complicating things are legally made cigarettes, so-called “illicit whites” that are smuggled into the EU from Ukraine and Russia, essentially becoming “duty-free” cigarettes. Illicit white smokes comprise nearly a quarter of all contraband cigarettes, a sharp increase from just 4% in 2007.

The uptick of contraband cigarettes impacts tax revenue for the EU’s cash-strapped countries. The report puts the EU’s yearly shortfall from illegal cigarette sales at €11 billion.

OLAF (European Anti-Fraud Office) has stepped up its efforts to catch cigarette smugglers, to some success. Austin Rowan, an OLAF spokesperson, said the number of cigarette confiscations had dropped last year, possibly indicating a narrowing contraband market. “For us, the real barometer is the reports of illicit seizures,” he said.

But the report has found illegal cigarettes, specifically, illicit whites, are on the upswing. The porous borders of the EU’s eastern front can be difficult to patrol adequately. OLAF is working on border control to stem the flow of contraband cigarettes.

Brussels has started an proposal that would make all EU nations have a new minimum cigarette tax rate starting in 2014, with countries with low taxes having until 2018 to bring the rate up. The tobacco industry argues that jacking up prices will only fuel the contraband market.

The United Kingdom released a study earlier this year that pointed out the growing prevalence of contraband smokes. In Canada, a recent study offered insights into smothering illegal sales of cigarettes.