The Illegal Empire is the third biggest player in the tobacco market, causing tens of billions of tax revenues to be lost.
Buying a dodgy pack of cigarettes from the man down the road may seem a relatively harmless transaction. Borderline illegal, yes, but no real harm done in a cash economy, right?
Well, that couldn’t be more wrong.
The illicit tobacco trade is huge - around 11% of all tobacco products around the world are illegal - that means there are 657 billion illegal cigarettes on the global market each year. And even that number is thought to be growing. An annual KPMG study on the trade reckoned that, in the EU alone, the numbers were up an 87% in 2020. That equates to 34.2 billion cigarettes and a €8.5 billion tax loss in the EU alone. The numbers for the French market are stark: a 609% increase, equating to 5.1 billion counterfeit cigarettes.
Criminals are the third biggest player in the tobacco market.
These are the biggest growth figures in half a decade - and the numbers become so big that it tends to smother the human impact. Talking so much of billions becomes too big to comprehend, and hides the individuals who suffer as a result.
The first victim of that is the consumer. There is, obviously, no imposition of trading standards on the illicit trade - so if cigarettes are counterfeits that will also mean illegal ingredients, such as rat droppings, dirt, lead and cadmium. There aren’t many industries that poison their customers so carelessly.
But those who don’t use tobacco are also impacted. At a time of great economic uncertainty around the world, the last thing that governments need is for tax revenues to disappear. The global tax loss to finance ministries is estimated at $40.5 billion - money that could have been spent on infrastructure, healthcare, education and so on. The UK government estimates that this equates to a loss of 16% of the tax liabilities of the legitimate tobacco industry. Money that no government can afford to lose.
Besides the economic cost, there is a human toll. This is not a harmless act of “getting one over on the taxman,” but a vicious cycle that allows criminal gangs and networks to thrive. According to the Transnational Alliance to Combat Illicit Trade (TRACIT), organised crime groups rely on forced labour to manufacture illegal cigarettes. Worse still is where that money goes - the gangs who make these enormous profits funnel their profits into wider criminal activity: money laundering, bribery, corruption, human trafficking, the smuggling of guns and illegal drugs... and even terrorism. And according to the Centre for the Analysis of Terrorism, the counterfeiting or smuggling of tobacco products has been the fastest-growing source of revenue for terrorist groups over the last decade.
For terrorists, illicit trades like this are a stable source of funding. The FBI says that Hamas and Al Qaeda both receive significant funding from illegal tobacco and, more specifically, the 2015 Charlie Hebdo attack in Paris and the 2013 terror attack in Agadez, Niger, were reportedly funded by cigarette smuggling and the selling of counterfeit trainers.
Without coherent action from a number of governments and agencies, the illegal trade will continue to grow and prosper - with greater suffering to individuals and economies as a result.
For more on what is being done to combat the trade, visit Crime Stoppers International.
