Taxation, lack of checks boost illegal tobacco

Tax hikes on cigarettes and other tobacco products have led to a spike contraband activities in the sector that are eating into revenues. In 2016, one in five packs of cigarettes consumed were illegal. This is the second highest level in the European Union, resulting in losses of over 600 million euros in tax revenues for state coffers.

The outlook for this year is even worse. A recent study by the Foundation for Economic and Industrial Research (IOBE) estimates that, this year, contraband cigarettes will account for 30 percent of sales.

The first six months of the year have shown a steep decrease in the legal market, at a pace that is twice what it was during the same period last year, while revenues are facing severe pressure.

Another problem is the lack of inspections, which a report on Project SUN by KPMG has focused on. It points out that there are no fixed X-ray machines at any Greek port – not even in Piraeus, the third largest port in Europe.

Industry players believe that the big problem is taxation. From the start of 2017, 90 percent of the average retail price of a pack of cigarettes is taxes. It is reminded that the tobacco industry currently supports 60,000 jobs in Greece, half of which are in tobacco growing, and the rise in contraband cigarettes poses a serious threat.