The illegal tobacco trade is experiencing a significant boom across the European Union, according to a report released on Tuesday by the bloc's financial watchdog, the European Court of Auditors (ECA). The report indicates that nearly one in 10 cigarettes are either produced illicitly or smuggled, resulting in an estimated annual loss of €13bn in tax revenue.
The ECA highlighted a notable shift in the trade's dynamics, with illicit manufacturing now dramatically increasing within the bloc and largely overtaking traditional smuggling operations. Petri Sarvamaa of the ECA stated that organised crime gangs are establishing production facilities inside the EU to shorten supply chains and be closer to consumers, with illegal production sites now identified in almost every EU member state.
Examples cited in the report include a large-scale illicit cigarette factory in Belgium, dismantled last year, which operated around the clock with 50 workers and four production lines capable of producing 1m cigarettes per hour. In Spain, police raided the largest illegal facility uncovered so far, seizing 3m packs of cigarettes valued at €15m and five tonnes of raw tobacco worth €5m, leading to 20 arrests.
The ECA report also noted that these illicit factories often operate for two to four months, utilising sophisticated equipment and experienced technicians. Organised crime groups are reportedly splitting production across multiple facilities, often in border regions, and tailoring products for specific markets.
Beyond the financial impact, the trade undermines public health policies by making tobacco products cheaper and more accessible, particularly to young people, according to Sarvamaa. It also fuels organised crime and finances other illegal activities. Despite an overall fall in tobacco consumption across the EU, the quantity of illicit tobacco products has steadily risen, reaching about 8.8% of total cigarette consumption in 2023.
The report suggests that efforts to combat the trade are hampered by unharmonised European law and uneven enforcement among member states. Sarvamaa concluded that criminals are succeeding due to gaps in coordination, information, and enforcement, rather than a lack of legislation.