Illegal Cigarettes in Europe Dwindle Tax Revenues

April 22, 2013 Taxation in EU

Taxes on CigarettesNEW YORK – Over the last three years the EU has lost out on more than EUR 30 billion in tax revenues, as more and more taxpayers choose to purchase cigarettes of the black market.

The consumption of counterfeit and contraband cigarettes in Europe continued to rise for the sixth year in a row, leading to billions in lost tax revenues, according to a report commissioned by the international cigarette manufacturer Philip Morris International.

According to information in the report, in 2012 nearly 65.5 billion illegal cigarettes were purchased in Europe, accounting for over 11.1 percent of all cigarettes consumed in Europe, compared to approximately 10.4 percent in 2011.

Cumulatively the EU lost an estimated EUR 12.5 billion in tax revenues from the illegal sales, as the purchase of counterfeit and contraband tobacco products is largely untaxed.

It is estimated that if all of the illegal purchased cigarettes consumed in the EU since 2010 were sold on the legitimate market, the cumulative tax revenues which could have been raised would have been as high as EUR 34.3 billion.

Excessive taxation was labelled as one of the reasons fueling the continuing consumption of illegal cigarettes, with the findings in the report placing part of the cause on “…extreme tax and regulatory schemes that shift consumption from the legal to the illegal tobacco market”.

Photo by g0dd4mn[LZW]