European Union illegal cigarette market surges amid tax hikes

A KPMG report shows that illegal cigarettes now account for more than 10% of total consumption in the European Union, with 41.8 billion illicit units smoked last year – roughly equal to the legal market in Poland. The gray market is estimated to cost EU member states €16.7 billion in lost tax revenue. France dominates the illicit supply chain, controlling about 41% of the illegal market, while Belgium recorded a historic jump in illegal consumption. Air‑smuggling, often using drones and balloons, has become a major conduit, especially into Lithuania where 83% of illegal tobacco arrives by air.

In Poland, organized crime groups have set up full‑scale production facilities that can output up to 25 million cigarettes a day. Recent police, customs and anti‑smuggling operations have dismantled dozens of such factories, seizing millions of illegal cigarettes and hundreds of tonnes of tobacco. The surge follows sharp excise‑tax increases on tobacco products, which have boosted prices and incentivised criminal manufacturers.

Authorities stress that tighter cooperation and coordinated border controls are needed across the EU to curb the rapidly expanding illicit trade, which is also linked to criminal networks suspected of ties to Russia.