Smuggled cigarettes take up 15 pct of market

By Anestis Dokas

The sale of contraband cigarettes in Greece has grown considerably, estimated at some 3.5 billion euros per year for 2010 and 2011, an amount which corresponds to about 15 percent of the legal market, according to Spyros Flengas, the head of the Association of Hellenic Tobacco Industries.

In a bid to combat the phenomenon that deprives the state of millions of euros in tax revenues and tobacco firms of a significant amount of income, the Papastratos tobacco company has offered to deliver special seminars for police officers that investigate cigarette smuggling, as well as provide special equipment that can detect illegal cargoes, as part of an agreement with the Public Order Ministry.

Flengas says that the World Health Organization?s protocol aimed at the ellimination of the illicit trade in tobacco products, to be completed by the end of 2012, provides for the industry to establish a global tracking and tracing system for its products within three years from the signing of the protocol. The marking of the products will have to reveal the authenticity of the tobacco product, its production date, the machine that has produced it and the identity of its first recipient.

Prior to the onset of the financial crisis in Greece the contraband cigarette market accounted for just 3 percent of sales, given that legally sold products were relatively cheap. However economic developments have led to consumers turning increasingly to illegal products while the legal market declines at an alarming pace.

The domestic tobacco industry estimates that the legal market has shrunk in the two years from January 2010 to December 2011 by a total of 25 percent, while the first couple of months of 2012 saw an additional drop of about 10 percent, despite a significant decline in the price of expensive legal products, averaging about 12.5 percent, that applied for the first time in December 2011. State revenues from cigarette taxation amounted to 3.6 billion euros in 2011.

Tobacco industry officials are telling Kathimerini that cigarette smuggling has spun out of control and is threatening the very viability of tobacco companies.

Yet consumers? swing in favor of low-cost tobacco products is not only down to the economic crisis, but also due to high taxation. This has led to huge price hikes that have seen expensive brands of cigarette soar from 3.20 euros per pack to 4 euros within just 12 months. Some 84 percent of that price concerns the special consumption tax and value-added tax, a rate that is considered one of the highest in the European Union, where the average tax rate is at 75 percent.