56.6 Billion Illegal Cigarettes Consumed in the EU in 2014 according to a new KPMG report
The scale of the illegal trade in cigarettes remains sizeable in the European Union (EU), representing 10.4% of total consumption in 2014, according to the latest annual report by KPMG . This illegal market costs more taxpayers and communities more than €11 billion a year in lost tax revenue.“The illegal cigarette market is a complex and significant problem in the EU and around the world. While collective efforts in the EU have made progress to help stabilize the size of the black market and reduce the contraband of genuine products, ongoing collaboration between the public and private sector is still needed,” said Alvise Giustiniani, Vice President, Illicit Trade Strategies & Prevention for Philip Morris International.
According to KPMG, the source and type of products available on the illegal tobacco market have continued to evolve, while the upward trend of illegal trade levels in the EU has moderated in recent years. 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.
The report also found that while smuggling of well-known brands has become less common, the number of “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 - has grown exponentially from virtually zero in 2006 to 37% of all illegal cigarettes in 2014. More specifically, 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.
The illegal cigarette market continues to deprive Member States of much needed revenues, hurts legitimate businesses, and fosters crime in local communities.The KPMG study is the only comprehensive annual measurement of the black market for cigarettes in the EU, and has been conducted every year since 2006, as part of the Cooperation Agreement between Philip Morris International, the European Commission and the EU Member States. Since 2013, the study has been commissioned by all four major tobacco manufacturers – BAT, Imperial, JTI and PMI.