July the 2nd, 2022 - The illegal cigarette market seems to remain booming regardless of economic situations and of the current issue of ongoing inflation. This is a large problem faced by all EU member states, but just how does Croatia stand when it comes to this apparently eternal question?

As Poslovni Dnevnik writes, Philip Morris International Inc. (PMI) is calling on European Union regulators and legislators to pay closer attention to the millions of adult smokers who are turning to the illegal cigarette market instead of switching to alternative products with reduced harm. KPMG's annual study on illegal cigarette consumption in 2021, commissioned by PMI, reveals that last year, total illegal cigarette consumption increased by an estimated 3.9 percent, or 1.3 billion cigarettes, bringing the total to 35.5 billion.

At the same time, the study estimates that the total consumption of cigarettes actually did decrease across the EU decreased in the same period.

According to the report, the increase in illegal consumption across the EU was largely driven by an estimated 33 percent increase in counterfeit cigarette consumption in France, which rose to 8 billion cigarettes last year. Taken as a whole, France remains the largest market for illegal cigarettes in the whole of the EU, with a total of 15.1 billion illegal cigarettes smoked there in 2021, accounting for 29 percent of total cigarette consumption in that country and representing significant growth compared to 13 percent back in 2017.

“The findings of this report should be a major wake-up call. It's very alarming that even in countries that maintain high excise taxes on cigarettes, such as France, instead of reducing the prevalence of smoking, we're seeing an increase in the consumption of counterfeit cigarettes. In fact, in France over the past five years, while the average price of a pack of legal cigarettes has more than halved, the number of adult smokers has only slightly decreased. But there's still hope.

Other EU countries have adopted differentiated policies on alternatives to cigarette smoking that support a continuous decline in cigarette consumption while simultaneously reducing trade on the illegal cigarette market, and they're already showing some rather encouraging results. The European Commission in Brussels should make this the basis for the future,” said Gregoire Verdeaux, senior vice president of external affairs at PMI.

KPMG's annual report focuses on the consumption and flow of illegal cigarettes across 30 European countries — the 27 EU member states plus the United Kingdom of Great Britain and Northern Ireland, Norway and Switzerland. The report also states that the governments of EU countries would have collected an additional 10.4 billion euros in taxes if these cigarettes had been purchased legally and not on the illegal cigarette market.

The KPMG report also shows that 16 out of 27, or roughly half of the EU member states, experienced a decline or remained stable terms of consumption from the illegal cigarette market back in 2021. Among these countries, Poland saw the largest decline in illegal quantities, with a decrease of 3.7 percentage points.

Consumption from the illegal cigarette market was the main driver of illegal trade across the EU as a bloc, and it's been estimated that the consumption of these illegal cigarettes reached a total of 12.3 billion, which is 34.6 percent of the total illegal consumption. Due to travel and border crossing restrictions during the coronavirus pandemic, organised criminal groups focused on the production of illegal cigarettes within the borders of the EU itself. Interviews conducted by KPMG with seven different law enforcement authorities revealed that illegal production is increasingly moving to Western Europe to be closer to higher-priced end markets such as France and the United Kingdom.

The continued growth of the black market for counterfeit and contraband cigarettes seriously undermines legitimate efforts to reduce and eventually eradicate cigarette smoking.

Here on the Croatian market back in 2021, the total consumption of cigarettes remained stable and amounted to 5.8 billion of them. Six percent of these were from the illegal cigarette market, which is a decrease of 0.65 percentage points when compared to 2020. The largest number of illegal cigarettes circulating here in Croatia are the so-called Illicit Whites, which are cigarettes that don't have any country of origin marked on them. The Croatian state lost an enormous 54 million euros in 2021 due to the illegal cigarette market.

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