Ukraine: Drug smugglers get arrested by armed border guards
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KPMG’s report, entitled Illicit Cigarette Consumption in the EU, UK, Norway and Switzerland, shines a light on illicit tobacco consumption, with a staggering 34.2 billion counterfeit cigarettes consumed within the bloc in 2020, representing an increase of 0.8 percent compared with 2019, despite the pandemic. France was by far the biggest culprit, with an overall increase of 4.6 billion cigarettes in 2020, driven by an unprecedented 5.1 billion or 609 percent increase in counterfeit trade.
This has been partially offset by a decrease in illicit whites, defined as “cigarettes that are usually manufactured legally in one country/market but which the evidence suggests have been smuggled across borders during their transit to the destination market”.
Conversely, Malta saw the illicit market for cigarettes drop from 17.2 percent in 2016 to 6.4 percent last year, something which the report attributes not only to effective customs controls but also to tax stability.
Smuggling from identifiable markets outside the EU27 fell by 2.4 billion last year, with the largest changes being an increase of 0.9 billion in Belarus labelled packs and a decrease of 0.6 billion in Ukraine-labelled packs.
The EU and its member states really should get their own house in order before lecturing the UK
Total tax losses for the 27 EU countries based on working-age population (WAP) were estimated to be €8.5billion in 2020.
The figure represented a €1.2billion rise compared with 2019.
Referring to the ongoing wrangle over the Northern Ireland Protocol, Pieter Cleppe, a Brussels-based research fellow with the think tank Property Rights Alliance, told Express.co.uk: “The EU and its member states really should get their own house in order before lecturing the UK about lacklustre border checks and the need for strict Irish Sea checks.
“As the KPMG report illustrates, Malta’s effective border enforcement has made it more successful than the likes of France to combat illegal tobacco.
“But also Malta’s tax stability is part of its success, as this is yet more proof of how big the impact of increased taxation is on making tobacco less affordable and on people switching to illegal products.
“Policymakers should take note that even lockdowns cannot stop this dynamic.”
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Mr Cleppe said: ”It is particularly interesting to compare Malta with France, which hiked taxes on cigarettes not less than three times in 2020 and which lost almost two billion euro more tax revenue last year as compared to 2019, following a 609 percent increase in counterfeit tobacco consumption during this ‘lockdown year’.
”Meanwhile, Malta, with its stable taxation levels, saw the size of its tax revenue lost due to illegal trade dropping as compared to 2019.
”Estimates put the cost of illicit tobacco trade at $40-50billion in lost annual global tax revenue.
”It may be counterintuitive for politicians, but hiking taxes only makes this worse.”
Smuggling of tobacco remained “rampant” in the EU, warned Mr Cleppe.
He said: “This is evident from Portuguese and Spanish police last month’s dismantling of an organised crime group involved in excise fraud and the smuggling of tobacco products.
“During the operation, 8000 kg of tobacco worth two million euros was seized.
“Another example is how this week, Belgian customs arrested 40 people and seized millions of cigarettes in what is the biggest Belgian customs operation ever to counter illegal tobacco smuggling.”
Mr Cleppe added: “Both illegal smuggling from outside the EU and within the EU have contributed to a bigger illicit market.
“Illicit imports from Belarus have increased.
“From Ukraine, they have decreased, but as Belgian customs recalls, this may be due to a changed strategy, whereby Ukrainian crime groups import machines into Belgium, so to be able to produce here.”
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