Brussels – “The only annual estimates of illicit rates currently available to us are funded and commissioned by the tobacco industry. And we know that their methodology is not transparent. They have an interest in exaggerating the illicit trade, especially in countries with tobacco tax policies.” With these words, Hana Ross, a research associate at the University of Vienna (WiiW) and an expert on tobacco taxation, opened the debate before the Committee on Tax Matters of the European Parliament. Together with the economist Kristijan Fidanovski, Ross presented a study on excise duties and the impact of the revision of the Internal Market Directive, which sparked heated debate among MEPs, some of whom accused the study of being flawed because “it does not take into account the impact of cross-border purchases and underestimates illicit trade.”
Later, speaking to Eunews, Hana Ross elaborated on her position, explaining that the current narrative might be skewed by private interests, as industries “have an interest in exaggerating illicit trade, particularly in countries with tobacco tax policies.” The expert suggested shifting the analytical focus to other phenomena, noting that in some national contexts “we do not believe this is as much of a problem as cross-border purchases,” and defined cross-border shopping in France as a key issue to be resolved. This argument was strongly supported by Renew MEP Gilles Boyer, who remarked that “the illicit market argument can no longer be used to curb tax increases,” because this is a matter of “public health,” adding that “the problem lies in cross-border flows: I live in Saxony, on the border with the Czech Republic, and I see this dynamic every day.”
Ross also put the scale of the illegal trade into perspective in percentage terms compared with other regions, noting that in Europe “the problem with illegal trade is that it accounts for 10 per cent of the total market: that is not the problem,” unlike in countries such as Brazil or South Africa, where illegal trade exceeds 50 per cent. Although a tracking and traceability system is in place within the EU, this “is not being used effectively to control illicit trade,” according to the researcher, because, whilst a significant amount of data is generated, it “is not processed or used for risk assessment.” The proposed solution relies on artificial intelligence to “clean” and process information flows, thereby enabling the authorities to have “better intelligence to know where to go to find these criminals.”
Ross’s view, however, met with strong opposition from the MEPs of Patriots for Europe (PfE) Siegbert Frank Droese and Jaroslava Pokorná Jermanová, who expressed serious doubts about the “downplaying of the problem of illicit trade.” Droese, in particular, pressed those present, arguing that the debate was “hypocritical, because you do not want to tax smoking but you want to ban it.”
The report by Euromonitor International, a global independent firm specialising in strategic market research and business intelligence, paints a picture that is starkly at odds with that of the researcher, highlighting that the European Union has become a “significant hub for the production and consumption of counterfeit goods.” Whilst the expert downplays the impact, the analysis stresses that counterfeit volumes have “risen sharply, from around 4.1 billion items to 13.4 billion in 2024,” reaching “around a third of the EU’s illicit cigarette market.”
According to the report, this escalation is fuelled by “organised criminal networks” that have established “sophisticated manufacturing operations localising production within the EU,” exploiting the “low affordability of cigarettes” and the “price differentials associated with excise duties and VAT”. The impact described is systemic: a loss of “€14.9 billion in tax revenue in 2024” is estimated, in addition to “public health risks, labour exploitation, and safety concerns.” Finally, Euromonitor warns that, without action to address “gaps in enforcement, particularly in postal, online, and intra-EU supply chains,” Europe risks consolidating a “shadow market that undermines health policy objectives and fuels organised crime.”
English version by the Translation Service of Withub
