Europe can’t afford to ignore the surge in illicit trade

Illicit cigarette consumption in the EU rose by 10.8 percent in 2024, reaching 38.9 billion cigarettes—nearly one in every ten smoked. This isn’t just a statistic—it’s a warning sign of a system under strain and a symptom of broader policy failure across Europe.

Nowhere is this crisis more visible than in France, the EU’s largest illicit cigarette market, and the Netherlands, which saw the steepest rise in illicit cigarettes share last year. These are not outliers—they are the predictable outcomes of ineffective strategies, particularly in high-tax, high-price markets. These are markets that have now become magnets for excessive black-market activity.

This surge comes at a critical moment for Europe. Every untaxed, unregulated cigarette represents lost revenue—funds that could have supported defense, internal security, and social programs. Illicit products not only undermine public health by bypassing harm-reduction measures but also erode the foundations of legitimate business and job creation. As Europe faces budgetary pressures and economic uncertainty, it is bleeding value through policies that simply aren’t working.

The good news? There’s a better path—if policymakers are willing to take it.

As the EU considers revisions to the Tobacco Excise Directive, it faces a clear choice: Continue relying on well-intentioned but ineffective strategies that have proven insufficient to deter illicit activity, or adopt a smarter, evidence-based approach. Illicit trade thrives where tax gaps are wide and enforcement is weak. In contrast, countries that pair stable fiscal policies with strong anti-illicit frameworks are seeing real progress. This is why we urge EU policymakers to adopt a harmonized excise structure that narrows tax gaps and strengthens cross-border enforcement in an effort to curb illicit trade schemes.

The latest KPMG report, commissioned by PMI, highlights this contrast. France and the Netherlands—marked by steep tax increases—are increasingly overwhelmed by illicit flows. The Netherlands, in particular, is a case study of what not to do: Illicit cigarette volumes increased by 1.1 billion in 2024 and illicit consumption, now at 17.9 percent, has more than doubled compared to 2023. Estimated tax revenue loss has tripled year-over-year, reaching almost EUR 900 million. Meanwhile, countries such as Bulgaria, Greece, Italy, and Portugal—and Ukraine, outside the EU—are showing that a different approach works. Greece reduced illicit consumption by more than six percentage points in one year. Portugal and Italy have stabilized their markets through predictable tax regimes, and Ukraine cut illicit cigarette volumes by 2.4 billion—or 29 percent—in 2024, reversing the previous year’s spike.

These results are no accident. They stem from balanced taxation, strategic enforcement, and public-private collaboration. They prove that pragmatic regulation works—while prohibitionist models, abrupt tax hikes, and one-dimensional policies do not.

Europe’s opportunity lies in learning from what works, not repeating what doesn’t. We need enforceable, well-designed regulation that protects revenue, secures borders, and supports harm reduction. This is about more than tobacco—it’s about sound governance, fairness, and fiscal responsibility.

The 2024 KPMG findings should be more than a retrospective—it should be a call to action and a roadmap on how to get there. If Europe is serious about reducing smoking and dismantling illicit trade, it must adopt policies rooted in reality and guided by results.