EC estimated budget losses from illegal cigarette trade in Ukraine
Euractiv named Ukraine in the list of countries where the illegal trade in tobacco products has already started to create significant problems for the state budget.
"The problem of illegal trade (in cigarettes) also appeared in Ukraine, depriving the country of much-needed income during the Russian invasion. The illegal trade in tobacco products costs the Ukrainian budget approximately 180 million euros every year," writes Euractiv.
The publication also notes that such significant losses have already "forced President Volodymyr Zelensky to intervene and close the tobacco factory responsible for illegal production." A significant increase in illegal trade in tobacco products is also taking place in the countries of the European Union. In general, illegal consumption in the European Union in 2021 increased by 3.9%, or by 1.3 billion cigarettes. For comparison: in 2020, growth was 2.3%. According to the KPMG report, the growth of illegal cigarette trade in the EU countries cost the budgets of European countries about 10.4 billion euros in uncollected taxes.
France became one of the "record holders" for the growth of illegal trade in tobacco products. There, from 2017 to 2021, the share of the illegal cigarette market increased from 13.1% to 29.4%. The key reason for such a sharp increase was a strong increase in the tax burden on tobacco products - three times more than the minimum level of the European Union. As a result, in 2021 alone, France did not receive 6.2 billion euros in tax revenue. Euractiv writes that part of the governments of the EU countries are now also tempted to raise taxes on tobacco products due to budget problems. But there are risks of revenue shortfalls due to sharp tax increases, as happened in France.
