Philip morris international: new study finds eu black market for cigarettes reaches record high; member state tax loss an estimated eur12.5 billion — wsj.com

     LAUSANNE, Switzerland (BUSINESS WIRE) April 17, 2013 

    For the sixth year in a row, the illegal trade of cigarettes in the European Union reached a new record high, a KPMG study revealed today. In 2012 the levels rose to 11.1%, compared to 10.4% in 2011, resulting in an estimated EUR12.5 billion in lost tax revenues to Member States.

    «In the midst of the economic crisis and budget deficits, illegal cigarettes continue to plague Europe, costing Member States billions in lost taxes and destroying communities,» said Artyom Chernis, Philip Morris International’s (PMI) Vice President, Illicit Trade Strategies and Prevention. «This problem cannot be ignored by decision makers. Action is needed, and needed now to curb this activity and to find and prosecute the criminals and the networks that promote it. In addition, a comprehensive and thoughtful approach to policies at the EU and Member State level to both combat this problem and ensure it is not made worse in the years to come is essential.»

    The study, which is conducted annually by KPMG for Philip Morris International Inc. (PMI) (NYSE/Euronext Paris PM), the European Commission and all 27 EU Member States also found that

     Twelve countries' consumption of illegal cigarettes exceeded the EU average (of total cigarette consumption), including Lithuania 27.5% Ireland 19.1% Finland 16.9% UK 16.4% France 15.7% Greece 13.4% Poland 13% and Germany 11.1%. The UK, Greece, Italy, and Estonia are home to the sharpest increases in illegal cigarette consumption since 2011. Consumption of illicit cigarettes increased to 65.5 billion cigarettes an amount equivalent to the entire legal markets of France and Portugal combined. It is estimated that had the cigarettes sold on the black market been sold in the legal market, Member State governments would have gained an additional EUR34.3 billion in tax revenue since the beginning of 2010. Southern European countries continued to increase their share of the illegal cigarette market, a trend that began in 2009. This is primarily a result of a 50% increase in Italy between 2011 and 2012. "Illicit white" cigarettes cigarettes that are manufactured solely for the purpose of being smuggled now constitute one quarter (24.3%) of the illegal cigarettes smoked in Europe, compared to just 2.4% in 2006. 

    The illicit trade in tobacco products fuels organized crime and damages economies and societies in the EU and around the world. The primary drivers of this activity are high profitability compared to low risk of penalties for criminals insufficient financial and human resources and lack of cross border cooperation to combat the problem extreme tax and regulatory schemes that shift consumption from the legal to the illegal tobacco market the current economic downturn and low public awareness about the penalties and consequences of the illegal tobacco trade.

    PMI has a dedicated team which works closely with governments and enforcement groups around the world to address this issue. Tackling the problem requires both the private and public sectors to address the supply and demand of illegal tobacco products, in addition to ensuring that the regulatory and fiscal environment does not further drive its growth.

    To read KPMG’s report, understand more about the black market for tobacco and to learn what PMI is doing to meet this challenge, visit

    About Philip Morris International Inc.

    Philip Morris International Inc. (PMI) is the leading international tobacco company, with seven of the world’s top 15 international brands, including Marlboro, the number one cigarette brand worldwide. PMI’s products are sold in more than 180 markets. In 2012, the company held an estimated 16.3% share of the total international cigarette market outside of the U.S., or 28.8% excluding the People’s Republic of China and the U.S. For more information, see

    KPMG Study on the illicit cigarette consumption in the EU

    KPMG has conducted this study every year since 2006, as part of the cooperation agreement between PMI, the European Commission and the EU member states. The results of these studies have been shared with the European Anti Fraud Office (OLAF).

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    Newstalk — menthol cigarettes to be banned under new eu directive

    EU Health Ministers have agreed to ban the sale of menthol cigarettes across the union.

    The Council was chaired by Minister James Reilly and agreed on a range of measures aimed at reducing the number of people taking up smoking.

    The agreement includes new rules on how tobacco products should be labelled, packaged and manufactured. It also targets product ‘attractiveness’, with young people in mind.

    However a further proposal on banning slim cigarettes, seen as more popular among younger smokers has been rejected.

    In addition to the ban on menthol flavoured tobacco products the Council of Ministers agreed to increase the size of the health warnings on cigarette packets.

    Minister Reilly warmly welcomed the outcome, saying it was «a remarkable achievement for the Irish Presidency, which set the ambitious target of reaching Council agreement on this important file in the space of six months».

    «The fact that this has happened represents a huge step forward in the fight against tobacco use, as well as a victory for public health against those unwilling to acknowledge the devastating consequences of tobacco addiction in our society» he added.

    Ministers agreed on

    • mandatory combined (picture and text) health warnings covering 65% of all cigarette and roll your own tobacco packs
    • minimum packet dimensions to ensure greater visibility of health warnings and rule out the possibility of lipstick style packs popular amongst young people
    • a ban on tobacco products with a characterising flavour other than tobacco, like fruit or menthol, seen to facilitate smoking uptake by masking the tobacco flavour
    • provisions for the setting up of a new EU wide tracking and tracing system to combat illicit trade
    • stricter rules for nicotine containing products which will require those over a certain level of nicotine to be authorised as pharmaceuticals

    Reaching agreement on the revision of the Tobacco Products Directive had been the main priority of the Irish Presidency.

    The European Commission says tobacco is the largest single cause of avoidable death in the European Union. The EU is working to prevent people from taking up smoking, help smokers to quit, protect people from exposure to tobacco smoke and restrict tobacco advertising and marketing.

    The Commission says the number of smokers in the EU is around one third of the population and that the associated health problems include some 695,000 smoking related deaths each year the equivalent of three jumbo jets crashing each day.

    Almost half of those dying are aged between 35 69.

    A study published earlier this month in the British Medical Journal shows that an average employee who smokes costs around 4,600 more a year than a non smoker due to time off, smoking breaks and healthcare costs.

    Plain packaged cigarettes have already been spearheaded by Minister Reilly, which are set come into force in 2014.

    Speaking in Luxembourg, the Minister said this has been his most important priority.