EU’s illegal trade falling but still substantial
The scale of the EU’s illegal trade in cigarettes remains ‘sizeable’, with 56.6 billion illicit cigarettes consumed there last year – about 10.4 percent of total consumption, according to a press note posted on Philip Morris International’s website, citing the latest annual report by KPMG.
The report was prepared for British American Tobacco, Imperial Tobacco, Japan Tobacco International and PMI.
‘This illegal market costs taxpayers and communities more than €11 billion a year in lost tax revenue,’ the note said. ‘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 illicit tobacco market are said to have continued to evolve, though the upward trend of illegal trade levels in the EU has been reversed in recent years. For example, last year, more than eight out of 10 of the illicit cigarettes consumed in the EU originated outside the EU, which is a 10 percent increase compared to the situation during 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.”
‘Illicit whites,’ which are cigarettes that are generally produced legally in a country but are smuggled into other countries where they have limited or no legal distribution, are said to be proliferating across the EU. 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 percent of all illicit cigarettes last year.
‘The illegal cigarette market continues to deprive member states of much needed revenues, hurts legitimate businesses, and fosters crime in local communities,’ said the press note. ‘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.’
BAT, Imperial, JTI and PMI remained committed to these efforts and together with law enforcement continued to invest in combating this problem, the press note said.
Additional findings in the KPMG report include:
* Illicit whites brand flows grew by eight percent to 21.1 billion cigarettes last year, with consumption of such products being most prevalent in Poland, Italy, Spain and Greece;
* Last year, 10.4 percent of all cigarettes consumed in the EU were illicit, compared to 10.5 percent in 2013 and 11.1 percent in 2012;
* Total illicit cigarette volumes declined by 3.3 percent last year to 56.6 billion cigarettes.
The 2014 KPMG study on the illegal cigarette trade in the EU, Switzerland and Norway is available on KPMG’s website: http://kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/Pages/the-illicit-cigarette-market.aspx.