On eve of World No Tobacco Day, report confirms sustained rates of illegal tobacco trade across the EU, worth more than €11 billion in lost tax revenue

The scale of the illegal trade in cigarettes remains sizeable in the European Union, with a total of 56.6 billion illegal cigarettes consumed in 2014, representing 10.4 per cent of total consumption, according to the latest annual report by KPMG.

This illegal market costs taxpayers and communities more than €11 billion a year in lost tax revenue. If combined, the thousands of transactions made by criminals involved in the illegal tobacco trade would equate to them being the fifth largest cigarette supplier to EU consumers.

The source and type of products available on the illegal tobacco market have continued to evolve, while the upward trend of illegal trade levels in the EU has moderated in recent years.

For example, in 2014, more than eight out of 10 illegal cigarettes originated from outside the EU, which is a 10 per cent increase compared to 2013.

In contrast, flows within the EU continue to decline, driven by improved industry supply chain controls and narrowing price gaps between EU member states.

“Overall levels of illicit cigarette consumption in the EU remained essentially flat during 2014, however, the illegal tobacco market remains sizeable and continues to evolve,” said Robin Cartwright, a partner at KPMG.

“Our research shows that, while this is a problem that touches every member state, caution is needed particularly in countries that share borders with non-EU countries where cigarettes are cheaper and where we continue to see high illicit cigarette consumption levels,” Cartwright added.

‘Illicit whites’ – cigarettes that are generally produced legally in a country but are smuggled into other countries where they have limited or no legal distribution – are also proliferating across the EU.

56.6 billion illegal cigarettes consumed in the EU in 2014

According to KPMG, while smuggling of well-known brands has become less common, the number of illicit whites has grown exponentially from virtually zero in 2006 to 37 per cent of all illegal cigarettes in 2014.

The illegal cigarette market continues to deprive member states of much-needed revenues, hurts legitimate businesses, and fosters crime in local communities.

Eliminating the illegal tobacco industry requires governments, law enforcement agencies, manufacturers, and retailers to work together to stop the criminals responsible for this illegal trade.

British American Tobacco (BAT), Imperial Tobacco Group (Imperial), Japan Tobacco International (JTI) and Philip Morris International (PMI) remain committed to these efforts and together with law enforcement continue to invest in combating this problem.

Additional findings

• Illicit whites brand flows grew by eight per cent to 21.1 billion cigarettes in 2014, with consumption of such products being most prevalent in Poland, Italy, Spain and Greece;

• In 2014, 10.4 per cent of all cigarettes consumed in the EU were illegal, compared to 10.5 per cent in 2013 and 11.1 per cent in 2012;

• The total illicit cigarette volumes declined by 3.3 per cent in 2014 to 56.6 billion cigarettes.

The tobacco trail also brings criminals into local communities.The tobacco trail also brings criminals into local communities.

Goals of the World No Tobacco Day 2015 campaign

Stop illicit trade of tobacco products

1. Harm to people’s health

Raise awareness on the harm to people’s health caused by the illicit trade in tobacco products, especially the youth and low-income groups, due to the increased accessibility and affordability of these products due to their lower costs.

2. Health warnings and other measures

Show how healthcare gains and programmes, tobacco control policies, like increased tax and prices, pictorial health warnings and other measures are undermined by the illicit trade in tobacco products.

3. Illicit trade of tobacco products

Demonstrate how the tobacco industry has been involved in the illicit trade of tobacco products.

4. Means of wealth for criminal groups

Highlight how the illicit trade of tobacco products is a means of amassing great wealth for criminal groups to finance other organised crime activities, including drugs, human and arms trafficking, as well as terrorism.

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