Big Tobacco fumes over new EU salvo

A European Union plan to crack down on cigarette smuggling has manufacturers such as British American Tobacco Plc up in arms about red tape, signalling that the bloc’s promise of more business-friendly regulation has clear limits when it comes to smoking.

The EU intends to track cigarette packages from the factory floor to the retail shelf using electronic codes, the latest weapon in a fight to stamp out illicit sales that deprive governments of more than 10bil a year in tax revenue.

The European Commission wants to let EU countries deviate from the current industry standard in Europe for serial codes on prod- ucts, saying any extra costs for companies would be negligible. The discrepancy threatens to create technical hassles for cigarette makers and undermine “track-and-trace” technological investments that, in the case of BAT alone, total £60mil since 2014, according to the company.

“It’s like saying Europe won’t measure distance in kilometers anymore just because the car industry supports that, so individual governments are free to devise their own measuring systems,” said Ronan Barry, BAT’s head of regulatory affairs in Brussels. “It gets very messy for no good reason.”

The EU cigarette market is a battleground between criminal groups long able to exploit open borders and lax law enforcement for lucrative smuggling and authorities are increasingly keen to give illicit tobacco trade the kind of high-profile attention traditionally devoted to drug trafficking.

The value of the European market for tobacco this year is about 200bil, according to statistics portal Statista.

Counterfeit and contraband accounted for more than 9% of EU cigarette consumption – or 48 billion cigarettes – in 2016, according to a study by KPMG.

This caused a total tax loss of 10.2bil, says the study commissioned by the Londonbased Royal United Services Institute.