Last week PMI renewed its call for continued action against illicit tobacco trade following the release of a new report produced by KPMG, indicating the challenges and financial costs associated with illicit trade. The “Stella Report,” indicated that the 2018 consumption of counterfeit and contraband cigarettes in the EU was estimated at 8.6 percent of total consumption, representing 43.6 billion cigarettes.
THE BLACK MARKET FOR CIGARETTES IN THE EU COST GOVERNMENTS A TOTAL OF 10 BILLION EUROS IN LOST TAX REVENUES
The KPMG report which was commissioned by PMI, also revealed that the black market for cigarettes in the EU cost governments a total of 10 billion euros in lost tax revenues and was equivalent in size to the total legal cigarette sales in the U.K., Austria and Denmark combined. The illicit cigarette consumption levels seem to have remained stable from last year, however the report indicated a 30% increase in counterfeit consumption, the largest amount recorded to date.
“Beyond damaging government revenues, harming legitimate businesses—including our own—and fueling crime in local communities, the availability of cheap, unregulated cigarettes on the black market undermines efforts to reduce smoking prevalence and prevent youth from smoking,” said Alvise Giustiniani, PMI’s vice president illicit trade prevention. “For PMI to have an impact in our drive to unsmoke the world, we must sustain our combined efforts to eliminate illicit cigarette trade, while ensuring responsible access to better alternatives for the men and women who would otherwise continue to smoke.”
The report findings included the following:
- Counterfeit was the only category to show year-on-year volume growth in 2018, while contraband, illicit whites and other illicit product volumes declined.
- Half of the countries included in the report saw an increase in counterfeit consumption. The largest counterfeit cigarette volumes were reported in Greece (1.5 billion cigarettes) and the U.K. (0.9 billion cigarettes).
- Non-E.U. countries remain the largest source of illicit cigarettes consumed in the E.U.; however, the report found a reduced incidence of illicit cigarette consumption in E.U. Eastern border countries, suggesting that law enforcement activities in those areas are bearing fruit.
- Consumption of legal non-domestic cigarettes grew by 10 percent in 2018, indicating that consumers purchased lower-priced products when traveling, rather than using the illicit market.