The illicit cigarette trade in the EU has reached a worrying milestone, but it also presents an opportunity to reset our approach. For the first time since 2014, more than 10 percent of cigarettes consumed in the European Union are illegal, according to KPMG’s latest study on the subject, “Illicit cigarette and heated tobacco consumption, and oral nicotine share in Europe.” This surge is fueling organized crime and draining public finances at a time when governments are under intense pressure to fund public services, security, and defense.
The message is clear: Extreme policies have not solved the problem, and the EU needs a more balanced, evidence‑based strategy that addresses root causes without creating new vulnerabilities. This also applies to the regulation of novel nicotine products such as e‑vapor and oral nicotine, which are increasingly affected by illicit trade and are by no means immune to illegal activity.
What the latest data shows is not just growth, but a fundamental shift. Counterfeit cigarettes are no longer a marginal issue; they have become the primary driver of illicit consumption in the EU. Criminal networks have adapted quickly, building sophisticated supply chains designed to bring fake products directly to consumers in high‑value markets. Production is increasingly happening closer to end markets, particularly in Western Europe, making detection harder and enforcement more complex. This evolution is undermining legitimate economic activity, depriving governments of vital revenue and fueling broader illicit activity.
A shifting illicit market, driven by counterfeits and organized crime
Western Europe now sits at the center of this challenge. Markets such as France, Belgium, and the Netherlands are among the most heavily impacted, with illicit consumption reaching levels that would have been unthinkable a decade ago. In France, illicit cigarettes now account for more than 40 percent of those consumed. These are not abstract statistics. They translate into lost tax revenues measured in the tens of billions of dollars each year across Europe—resources that could otherwise support health care systems, infrastructure, and the growing demands on security and defense in an increasingly fragmented geopolitical environment.
The rise of illicit trade also exposes deeper, structural weaknesses. Gaps in regulation, uneven enforcement, and inconsistent judicial follow‑up have created space for illicit trade to grow. This is happening at a time when many EU member states are already under broader economic and security pressure—from inflation and increased competition to rising budget demands driven by geopolitical fragmentation. Allowing illicit trade to expand unchecked is therefore not only a public finance issue, but a matter of economic resilience and security.
Where extreme policies fall short—and what can work instead
Closing these gaps requires coordinated action. Strong enforcement of existing rules is essential, but enforcement alone is not enough. Europe needs tighter cross‑border cooperation, stronger public‑private partnerships, alongside an EU regulatory framework that is grounded in evidence and enforceable in practice. Rules that look good on paper but cannot be applied effectively, risk becoming a dead letter, easily exploited by criminal networks. Measures should target those networks directly—not legitimate businesses that comply with the rules and contribute to Europe’s economy.
Experience across Europe shows that balance matters. Some countries have reduced illicit consumption through pragmatic policy mixes that combine predictable taxation, proportionate regulation, and consistent enforcement. In recent years, markets such as Greece have demonstrated that declines (3.4 percentage points) in illicit trade are possible when policy avoids extremes and focuses on what works in real‑world conditions. Even in highly challenging circumstances, as seen in Ukraine, determined enforcement and resilience have delivered measurable improvements, with illicit volumes declining by nearly one billion cigarettes year-on-year.
By contrast, there is mounting evidence that extreme policies can backfire. Excessive taxation and abrupt regulatory shifts, particularly when they outpace enforcement capacity, can unintentionally push consumers toward the black market. High‑burden markets like France and the Netherlands illustrate this risk clearly. When legal products become unaffordable or inaccessible for large segments of consumers, criminal networks step in to meet demand. The result is neither improved public health outcomes nor stable tax revenues, but a stronger illicit market that is harder to control.
This is not an argument against regulation or taxation. It is an argument for smarter design. Effective policy recognizes consumer behavior, purchasing power, and the adaptive nature of organized crime. It balances fiscal objectives with enforcement realities and avoids creating incentives that can be abused. In short, it is evidence‑based, predictable, and resilient.
PMI’s role: Contributing to solutions, not standing aside
At Philip Morris International, we believe business has a responsibility to be part of the solution. We are investing heavily in supply‑chain controls and product protection, leveraging state-of-the-art technologies, including anti‑counterfeiting measures. We work closely with law‑enforcement authorities across Europe, sharing expertise and supporting efforts to dismantle illicit manufacturing and distribution networks. These partnerships are already delivering tangible results.
At the same time, PMI has transformed its business, with a clear ambition to deliver a smoke‑free future. By investing in scientifically substantiated smoke‑free alternatives for adults who would otherwise continue to smoke, we aim to reduce overall demand for cigarettes, both legal and illegal. This transformation is not a silver bullet, but it is part of a broader, long‑term solution that aligns public health goals with efforts to shrink the illicit market.
No company, government, or agency can solve this problem alone. Progress depends on shared responsibility. Policymakers must design regulations that are enforceable and proportionate. Law‑enforcement agencies need the tools and cross‑border cooperation required to stay ahead of increasingly agile criminal networks. Businesses must secure their supply chains and collaborate transparently. Public debate, in turn, must move away from polarized positions toward pragmatic, evidence‑based solutions.
The rise of illicit cigarette consumption beyond 10 percent of the EU market should serve as a wake‑up call. It tells us the status quo is not working, but it also points toward a way forward, which could also provide a blueprint for the regulation of smoke-free products, such as e-vapor products and nicotine pouches, as these are not immune to illicit trade.
By rejecting extreme and prohibitive approaches, especially to these newer products which can help drive down smoking prevalence alongside existing cessation measures, Europe can protect public revenues, weaken organized crime, and support legitimate economic activity.
With coordinated action and a focus on solutions, we can turn the tide on illicit trade and build a more resilient future for Europe.