A global issue

Illegal trade is not a victimless crime

Because of its very nature, accurately quantifying the scale of illegal trade is difficult. In 2013, Euromonitor estimated the volume of illicit tobacco products at around 392 billion cigarettes annually (excluding China) – over 10% of the global market.

Governments lose an estimated 40 to 50 billion USD from their combined national budgets each year due to the illegal trade in both contraband and counterfeit cigarettes.

A single 40 foot container can hold 10 million illicit cigarettes.In the European Union, this represents an average loss of customs duty, excise duty and VAT of 2 million EUR. In some countries, the loss may be much higher.

The potential margin for criminals in the illegal tobacco trade is estimated at up to 900%.

Key factors contributing to illegal trade

There are two key areas that contribute to this global issue:

  1. High taxes

    One primary cause of illegal trade is high taxation in relation to neighboring countries. Raising taxes increases the incentive for criminals to participate in the illicit trade of tobacco, and can entice consumers to switch from legitimate to illegal tobacco products.

  2. Difficulties facing law enforcement

    For a number of reasons, law enforcement agencies often fail to deal with the illegal trade problem, or give it low priority.

In addition, difficult-to-control borders, the sophistication of organized crime, inadequately funded and trained law enforcement officers and a lack of knowledge, make anti-illicit trade initiatives difficult.

Criminal organizations are often attracted to cigarette smuggling as it is considered to be a high-profit, low-risk illegal activity incurring lighter penalties than criminal activities such as illegal drug smuggling or human trafficking.

For these reasons, strong government engagement and prioritization is required for success in fighting illegal trade.

The impact on society as a whole

  • Billions in taxes are lost every year, depriving the public sector of significant revenues
  • The profits generated by organized crime are used to further expand their networks and to finance other crime
  • Minors’ access to tobacco increases as those selling smuggled products don’t care about age limits or other laws.

The impact on business

  • The legitimate industry loses billions of volumes annually to illegal trade
  • Counterfeit cigarettes undermine the value of authentic products and the investments legitimate business put into their brands.

392bn

cigarettes smoked annually are estimated to be illegal

40bn+

USD global gov revenues lost annually to illicit trade