For a continent that spearheaded workplace smoking bans and slaps some of the highest tax rates on cigarette sales of any region in the world, Europe ...
For a continent that spearheaded workplace smoking bans and slaps some of the highest tax rates on cigarette sales of any region in the world, Europe has a serious smoking problem. In 2011, according to a report commissioned by the European Union and carried out by auditing firm KPMG, one in ten Winston cigarettes sold in the 27-nation bloc was contraband–that’s around 65 billion cigarettes.
Making matters more difficult is the growing influx of so-called “illicit whites,” which are legally manufactured in places like Ukraine and Russia under brand names like Jin Ling and Raquel, then smuggled into the EU duty-free, according to the study.
The influx of smuggled cigs has implications not just for public health–cheap smoking products which widely thought to establish with high smoking rates–but also for tax revenues. At a time when many member states are desperate for cash, the report estimates the EU’s annual losses from contraband cigarette sales at €11 billion.
While some of the findings have been questioned by independent tobacco-industry analysts, there is no denying the scale of the problem.
Here in Brussels, where the Russian border is 900 miles away and tobacco taxes relatively low, vendors outside a weekend market make their rounds, mesh bags full of contraband cartons slung from their shoulders. Your correspondent was able to purchase a pack of what appeared to be Dutch Marlboros for €3.00 ($3.69)–40% percent off the cigarettes online store price.
The seller had no Jin Lings on hand, but that would seem an anomaly. Illicit whites, according to the report, make up 24% of all illegal cigarettes, up from 4% just five years ago. The EU’s anti-smuggling strategy has changed significantly over the last decade, with Brussels shifting from confrontation with the cigarette companies to something closer to collaboration.
Early last decade, Brussels sued Philip Morris for secretly encouraging the smuggling of its own cigarettes. The case was settled in 2004, with the lawsuit dropped in exchange for $1.25 billion and a pledge to cooperate with OLAF, the EU’s anti-fraud office, in anti-smuggling efforts. Since then, the EU has settled with three other major tobacco companies for an additional $900 million.
OLAF, which has taken the lead in coordinating anti-smuggling efforts in Brussels, has in the mean time launched some successful anti-smuggling stings, including a 2007 action called Operation Diabolo that saw state authorities intercept 135 million illegal cigs. Austin Rowan, an OLAF spokesman, said his organization was optimistic about its efforts, noting that the number of cigarette seizures had decreased in 2011, a possible indicator, he said, of a shrinking illicit market.
“For us, the real barometer is the reports of illicit seizures,” he declared.
But according to the report, the flood of illegal cigarettes has continued to increase, particularly the illicit whites coming from the east. As a result, it’s up to customs agents on the EU’s eastern frontier to seize untaxed cigarettes bound for Poland or Romania.
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