Illicit tobacco trade growing, says KPMG

The UK saw nearly a 50% rise in the consumption of counterfeit and contraband cigarettes in 2014, the second highest increase across the whole of the EU according to a new KPMG report commissioned by the “Big Four” tobacco companies.

This has been driven by an increase in black market tobacco coming out of Belarus and Pakistan and it is a growing problem, the report warns. One in two illegal cigarettes in the UK now comes from those countries as well as Poland.

The illegal brand Fest accounted for 70% of cigarettes from Belarus and 40% of the total amount of “illicit whites” in the UK.

James Barge, from Marlboro maker Philip Morris (PMI), said: “The KPMG report’s findings are very concerning. The illegal trade in cigarettes is not a victimless crime. It harms governments, taxpayers, consumers, and manufacturers. The only people that benefit from it are criminals. PMI remains committed to tackling the illegal trade in tobacco and to continuing to work closely together with our partners, law enforcement and government agencies to combat it.”

The key findings for the UK in 2014 include:

  • The illicit white brand Fest accounted for 70% of cigarettes from Belarus and 40% of the total amount of illicit whites in the UK.
  • 1 in 2 illegal cigarettes in the UK come from Poland, Pakistan or Belarus. 
  • The UK economy lost an estimated £2bn in tax revenues due to the black market trade in tobacco products and EU Member States lost an estimated €11bn in tax revenues.

The report confirms that the EU’s black market for tobacco remains a significant source of revenue loss for governments and a resilient competitor to the legitimate manufacturers and trade.

All four major tobacco manufacturers operating in the EU – BAT, Imperial, JTI and PMI – jointly commissioned the report. This allowed KPMG access to a wider set of data sources.

The 2014 KPMG study on the illegal cigarette consumption in the EU is available on KPMG’s website: http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/Pages/the-illicit-cigarette-market.aspx

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