Provisions in the proposed EU Tobacco Products Directive (TPD), including standardized packaging and a ban on menthol and slim cigarettes, have the potential to push consumer downtrading and fuel illegal trade, according to a study conducted by Roland Berger Strategy Consultants, commissioned by Philip Morris International and reported by Business Wire.
The report predicts 175,000 job losses, up to €5 billion ($6.5 billion) in lost tax revenue, and an increase in smoking as a consequence of price competition.
Patrick Mannsperger, Partner at Roland Berger, said the new TPD could affect not just the EU tobacco sector but also the European economy. The tobacco sector generates more than €100 billion in tax revenue every year, and lower revenues will require spending cuts or tax hikes in other areas.
Illegal trade, which already represents about 11 percent of cigarette consumption in the EU, could grow by 25-55 percent as a result of standardized packaging and the ban on slim and menthol cigarettes, the report said.
Sales of illegal cigarettes could rise from 68 billion to between 84 billion and 106 billion. Some countries would be particularly hard hit by the TPD. In Poland and Bulgaria, the directive could result in up to 50,000 and 29,000 job losses, respectively, the report added.
“We hope the EU will reconsider these proposals and replace them with a regulatory framework that is not politically driven, but science-based and effective in reducing the harm caused by smoking without imposing unnecessary burdens on the economy,” said PMI Vice President for Communications Julie Soderlund.