Poland tobacco excise hikes drive growth in illegal grey market

Significant increases in tobacco excise taxes in Poland have led to a rapid expansion of the grey market. According to data from the National Association of the Tobacco Industry, the share of illegal cigarettes in the market rose from 5.4% in 2024 to 9.7% in the first quarter of 2026.

The Ministry of Finance implemented much higher tax hikes than originally planned. While a 10% increase was initially discussed, actual hikes reached 25% for traditional cigarettes, 38% for smoking tobacco, 50% for innovative products, and 75% for e-cigarettes, alongside a 40 PLN fee for devices.

Despite these aggressive hikes, the expected surge in tax revenue has not materialized proportionally. While the Ministry projected an additional 3.5 billion PLN in revenue for 2025, the actual increase was only approximately 1.6 billion PLN, as total revenues rose from 33.6 billion PLN to 37.1 billion PLN. Industry experts suggest that the scale of the tax increases has pushed consumers toward illegal products, effectively diminishing the potential fiscal gains through the Laffer curve effect. Research by Almares, based on analyzing discarded cigarette packs across 70 Polish cities, corroborates this trend, showing the share of foreign, non-legal cigarettes rose from 4.4% to 9.6% since 2023.