France and the Netherlands lead sharp rise in illicit cigarette consumption across Europe

Smokers in the European Union consumed 38.9 billion illicit cigarettes in 2024, a 10.8% increase compared to 2023, according to the latest report by KPMG presented in Brussels in June.

This was the highest level of counterfeit cigarette consumption recorded by the global consultancy since 2015. The annual study commissioned by Philip Morris International (PMI) examined 38 countries in Europe, revealing that €14.9bn in tax revenues was lost by governments due to the black market in tobacco products.

The findings were presented by the NATO Defence College Foundation at a critical period for tobacco taxation as the EU has finally updated its tobacco excise legislation.

With the study also drawing attention to the link between illicit tobacco and organised crime, the foundation’s director Alessandro Politi warned at a roundtable discussion of a new concept of “blended threats”.  This complex network of criminal activity involved trafficking, money laundering, terrorism, cyber operations, counterfeit goods and subversive campaigns.

Low-cost flights and drones used to distribute illicit tobacco

The KPMG report highlighted the criminal underworld’s adeptness at installing illicit factories close to consumer markets, stepping up online sales and using low-cost airlines, rail and drones to distribute products.

The use of unregulated products was particularly rampant in France and Netherlands. As the largest illegal market in Europe, 18.7bn illicit cigarettes were consumed in France in 2024, accounting for 37.6% of total consumption. Meanwhile, illicit consumption in the Netherlands doubled to 17.9% of the national total — a 10.2% increase compared to the previous year.

Although neighbouring Belgium experienced a much less drastic rise of 2.6% in illicit cigarette consumption, the country continued to serve as a hub for illegal drugs and tobacco. Its strategic location and lack of coordinated law enforcement measures encouraged cross-border smuggling between countries exercising low- and high-tax tobacco policies. While the flow of illicit cigarettes from Bulgaria and Luxembourg to Belgium increased by 17%, this was partially offset by a drop in non-regulated products from Turkey.

In contrast to the worrying trend in France and the Netherlands, there were significant decreases in Bulgaria, Greece, Italy, Portugal and Ukraine. With a 17.5% consumption of illicit cigarettes, Greece reported a 6.2% drop and Ukraine achieved a 29% decline.

The UK was another country where illicit cigarette volumes decreased — almost 0.8 billion in 2024 — although illicit cigarettes as a share of total consumption remained stable. The UK is still the third-largest illicit market in Europe, with 5.9bn counterfeit and contraband cigarettes consumed last year. 

“Predictable tax regimes and robust support for local law enforcement actions” were responsible for this improved result, according to PMI’s president for the Europe region Massimo Andolina.

The study included for the first time the use of illicit heated tobacco products in the Czech Republic, Germany, Greece, Hungary, Italy, Lithuania, Poland, Romania, Spain and the UK. Contraband consumption represented 0.9% of the total volume with the UK possessing the highest share at 7.8%.

In exposing the full scale of the problem in a large number of countries across Europe, the 19th overview of the continent’s illegal cigarette market exposed the financial loss to governments as well as the extent of the criminal activity.

PMI’s senior vice president external affairs Christos Harpantidis highlighted the “massive negative socioeconomic impact” of illicit trade. “The availability of cheap, unregulated cigarettes in the underground economy also impairs efforts to reduce smoking rates and achieve a smoke-free future.”

The alarming illicit cigarette trends in France and the Netherlands were due to the countries pursuing excessive tobacco taxation policies, he added. “We hope that lessons are learned and we would love to see some common sense in terms of policies.”

Taskforces needed to dismantle criminal networks

Anti-illicit trade consultant and ex-Europol specialist Howard Pugh pointed out that excise duties on tobacco were important for financing law enforcement efforts to combat illicit cigarettes. “Career criminals move to tobacco because it is a high profit area.”

In terms of best practices for combatting the problem, he cited intelligence sharing between border police and the judiciary. “A multidisciplinary approach with taskforces of combined agents allowed access to data and resources would be a more powerful deterrent,” he said.

Pugh added that parallel investigations targeting criminal group’s resources and profits, public and private partnerships and public awareness were also necessary. “If you buy cigarettes from illegal sources, the money goes to organised crime.”

AmCham Ukraine’s deputy policy director on European Integration Oksana Shvets raised the issue of her country’s additional challenge of rebuilding war-torn regions while defending against hybrid threats. She called on public-private partnerships and further NATO-EU-Ukraine collaboration to aid recovery efforts

Shvets said law enforcement and political will were crucial for Ukraine to continue fighting, along with a stable tax policy on tobacco. “Rising taxes do not help the economy.”

The discussion concluded with a joint call for cross-border intelligence sharing and targeted regulatory action in the face of ever-evolving cyber and criminal activity.

With the European Commission already introducing steep price hikes to cigarettes and loose tobacco – as well as alternative products – in a new Tobacco Taxation Directive (TED), the thorny question of how far high taxes fuel the black market becomes even more pertinent.

The EU is also planning to impose an additional 15% levy on each member state’s tobacco tax revenue to boost its own budget; a new measure known as the Tobacco Excise Duty Own Resource (TEDOR. Increased taxes pose a risk of further saturating high-excise countries with illicit tobacco products.

Photos: NATO DCF roundtable event ©Erwin Hodister; ©Belga