56.6 Billion Illegal Cigarettes Consumed in the EU in 2014, Worth More Than €11bn in Lost Tax Revenue

02.06.2015
New KPMG report confirms sustained rates of illegal tobacco trade across the EU.

The scale of the illegal trade in cigarettes remains sizeable in the European Union (EU), with a total of 56.6 billion illegal cigarettes consumed in 2014, representing 10.4% 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 has 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 8 out of 10 illegal cigarettes originated from outside the EU, which is a 10% 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. 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,” commented Robin Cartwright, a Partner at KPMG.

“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. 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% 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 in the report include:

• Illicit whites brand flows grew by 8% 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% of all cigarettes consumed in the EU were illegal, compared to 10.5% in 2013 and 11.1% in 2012;

• Total illicit cigarette volumes declined by 3.3% in 2014 to 56.6 billion cigarettes.

The 2014 KPMG study on the illicit cigarette market in the EU, Switzerland and Norway is available on KPMG’s website:

kpmg.com