Key facts
- Nearly 10% of cigarettes in the EU are produced illicitly or smuggled, causing an estimated €13 billion annual loss in tax revenue.
- Illicit cigarette manufacturing has significantly increased within the EU, with production sites detected in almost every member state.
- Organized crime groups are establishing factories inside the EU to shorten supply chains and increase product accessibility.
- Large-scale illicit factories have been dismantled in Belgium and Spain, with significant seizures of cigarettes and tobacco.
- The illicit trade undermines public health policies by making tobacco products cheaper and more accessible, particularly to young people.
The illegal tobacco trade within the European Union is experiencing a significant boom, driven primarily by organized crime groups establishing illicit manufacturing operations across member states, according to a report by the European Court of Auditors (ECA). This shift from traditional smuggling to internal production is shortening supply chains and increasing the accessibility of cheaper tobacco products, leading to an estimated annual loss of €13 billion in tax revenue.
Illicit production sites have been detected in almost every EU state, with organized crime gangs employing sophisticated equipment and experienced technicians to run factories that can operate around the clock. Examples cited include a large-scale factory in Belgium dismantled last year, capable of producing one million cigarettes per hour, and a raid in Spain that seized 3 million packs of cigarettes valued at €15 million. French authorities also recently dismantled a cross-border operation that had supplied a city with 7,500 packs per delivery since December.
Beyond the substantial tax revenue loss, the ECA report highlights that the illicit trade undermines public health policies by making tobacco products more affordable and accessible, particularly to young people. It also serves as a funding source for other illegal activities. While overall tobacco consumption has been declining in the EU, the quantity of illicit products has steadily risen, accounting for approximately 8.8% of total cigarette consumption in 2023.
The report indicates that current EU and member state efforts to combat this trade are hampered by a lack of harmonized laws and inconsistent enforcement across jurisdictions. Criminals exploit these gaps by moving operations to more lenient areas, and information exchange between member states is inconsistent. The ECA emphasizes the need for a coordinated strategy to counter the organized crime groups involved.