The KPMG 2017 Project Sun report on counterfeit and contraband cigarette consumption in Europe shows an overall decrease in the trade of illicit cigarettes, although they are still estimated at 8.7% of total consumption. In total this represents a tax revenue loss of €10bn for EU member states, making illicit cigarettes one of the largest sources of overall consumption.
The report also shows that despite an overall European decrease, the consumption of counterfeit and contraband cigarettes has increased in several countries, including the UK and Ireland (respectively 18% and 20% of total consumption). The reason for this is that these countries have the largest price difference with the country of origin of these illicit products. By sharply and rapidly increasing cigarette prices, Member States are directly encouraging smuggling.
ESTA Secretary General Peter van der Mark said: “The figures reported demonstrate the importance of tailor-made tax policy-making. Counterfeit tobacco products represent an important loss of tax revenues. Governments must discourage consumers from purchasing illicit products by allowing for less expensive alternatives. It is essential to ensure the affordability of fine-cut products in order to maintain a buffer between legal and illegal trade.”