The illegal trade in tobacco is booming in the EU, according to a report by the bloc’s financial watchdog, with almost one in 10 cigarettes produced illicitly or smuggled, causing an estimated €13bn loss in tax revenue each year.
The European Court of Auditors (ECA) said in a report on Tuesday that the trade had “changed significantly” in recent years as smuggling, while still “a problem”, was overtaken by illicit manufacturing, which has increased dramatically in the bloc.
Organised crime gangs are moving production inside the EU “to shorten supply chains and get closer to consumers”, said the ECA’s Petri Sarvamaa. “Illegal production sites have now been detected in almost every EU member state.”
The ECA cited the example of a large-scale illicit cigarette factory in Belgium dismantled by police last year. It operated around the clock, with 50 workers running four production lines, each able to produce 1m cigarettes every hour.
During a raid on the largest illegal facility so far uncovered, in Spain, police seized 3m packs of cigarettes valued at €15m, five tonnes of raw tobacco worth €5m, and made 20 arrests. The factory’s products had been distributed across six EU countries.
“The scale is quite remarkable,” Sarvamaa said. “Last month French authorities dismantled a cross-border operation that had been supplying the city of Lille only since last December but had already made 120 deliveries of 7,500 packs each.”
The ECA report said such illicit cigarette factories, which usually operate for two- to four months, were using sophisticated equipment and employing experienced technicians to set up and maintain their machinery.
The organised crime groups that run them split production across multiple facilities and often locate them in border regions, tailoring their operations by producing specific brands for individual markets and even developing new tobacco products.
The damage goes beyond lost tax revenue. The trade “undermines public health policies by making tobacco products cheaper and more accessible, especially to young people”, Sarvamaa said. It also feeds organised crime and finances other illegal activities.
While, overall, tobacco consumption has continued to fall across the EU, the quantity of illicit tobacco products has risen steadily, reaching about 8.8 % of total cigarette consumption in 2023 (the latest figures available), the report said – although information about the size, structure or economic impact of the trade remains “incomplete and unreliable”.
The report said the EU and many member states had taken steps to combat the trade, but were hampered because European law in the area was not harmonised and member states’ efforts were uneven, leaving enforcement gaps.
National control systems and enforcement have different definitions of offences and of penalties, encouraging criminals to move to the more lax jurisdictions, and information exchanges in the bloc were inconsistent.
“Criminals involved in the illicit tobacco trade are succeeding not because Europe lacks legislation but because gaps remain in coordination, information and enforcement,” Sarvamaa said. “Organised crime has a strategy. We need one too.”