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Highly-Taxed Europe Flooded With 53 Billion Illegal Cigarettes

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Guy Bentley Research Associate, Reason Foundation

Europe consumed 53 billion illegal cigarettes in 2015, causing almost $13 billion in tax revenue to go up in smoke, according to a KPMG report released Wednesday.

The number of illegal cigarettes smoked in the European Union (EU) exceeds the entire legal market in Spain and accounts for one in 10 cigarettes smoked in the EU, says the report.

Although cigarette smuggling in the EU is still running at industrial like levels, the volume has actually declined a little from 2014 thanks to law enforcement activities and increasing growth of the EU economy.

“The industry believes their strict supply chain controls and shared intelligence, combined with authorities’ law enforcement, has resulted in a decline of around 20 percent in the illegal flow originating from within the EU,” said the report. Almost 90 percent of illegal cigarettes in Europe now come from non-EU countries.

Authorities seized 600 million cigarettes in 2015 — double the number seized the previous year. Poland and France had the highest volumes of black market cigarettes.

“Overall, levels of illicit cigarette consumption in the EU declined slightly during 2015. Despite this, illicit tobacco continues to represent a sizeable proportion of overall cigarette consumption. It’s clear that the ever-evolving illegal tobacco market continues to affect countries throughout the EU,” said Charlie Simpson, lead partner of the study at KPMG.

Europe’s vast black market in tobacco is in part thanks to high cigarette taxes in countries such as the UK. As prices rise, smokers look for cheaper options and international crime gangs are only too willing to oblige. (RELATED: High Cigarette Taxes And Black Market Tobacco Are Funding Global Terrorism)

Fifteen of the world’s leading terrorist organizations regularly turn to black market tobacco for financing. France’s Centre for the Analysis of Terrorism (CAT) lists the Pakistani Taliban, Lashkar-E-Taiba, al-Qaida in the Maghreb, Hezbollah, Hamas, FARC and PKK, among others, as groups profit significantly from tobacco smuggling.

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