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European Union efforts to curb tobacco consumption through increased excise taxes are facing an unintended consequence: a surge in cigarette smuggling, enriching criminal networks and costing governments billions in lost revenue. Amendments to the European Commission’s Tobacco Tax Directive, aimed at making tobacco products less attractive to consumers, are running head-to-head with a rapidly expanding black market, particularly in countries like Latvia.

The lion’s share of proposed amendments – 24 out of 29 – were submitted by Andris Gobiņš, a member of the European Economic and Social Committee (EESC) and President of the European Movement Latvia, signaling a strong push for the public health initiative. However, experts warn that without a coordinated crackdown on illicit trade, these efforts could be undermined. The growing problem of tobacco smuggling poses a significant threat to both public finances and national security.

In Latvia, smuggled cigarettes now account for 23% of the market, while illegal e-cigarettes make up a staggering 40%, according to recent data. This illicit trade cost Latvia an estimated €67 million in unpaid excise duty and VAT in 2024 alone – a 31% increase from the previous year. Across the entire European Union, uncollected excise and VAT revenues related to illegal tobacco totaled approximately €14.9 billion, with 39.2 billion cigarettes consumed illegally, representing 9.2% of the total market, according to Oxford Economics data. Ogreszinas.news reports that this situation is becoming “increasingly dramatic.”

Customs authorities are struggling to keep pace. Last year, they seized nearly 12 million contraband cigarettes. In early February, authorities confiscated 1.5 million illegal cigarettes from traders in the Dārziņi district of Riga. But seizures represent only a fraction of the total smuggled volume. The issue extends beyond financial losses, with officials warning that cigarette smuggling is now a national security concern.

Belarus as a Key Source of Contraband

The primary origin of contraband cigarettes is Belarus, where the trade is reportedly a significant component of the Lukashenko regime’s economic strategy in both Lithuania and Latvia. By failing to effectively combat this smuggling, European nations may be inadvertently supporting the Belarusian dictatorship. This connection highlights the geopolitical implications of the illicit tobacco trade.

Beyond the economic and security risks, there are growing concerns about public health. Illegal tobacco products often lack quality control and may contain dangerous levels of heavy metals, toxins, and carcinogenic substances, as well as excessive nicotine. While public awareness campaigns exist regarding the dangers of illegal alcohol, comparable data and public education efforts are lacking for illegal cigarettes.

Balancing Public Health and Economic Realities

These amendments to the Tobacco Tax Directive are the first in many years and aim to broaden the scope to include e-cigarette liquids, chewing tobacco, nicotine pouches, and raw tobacco. The directive too seeks to improve monitoring of cross-border shopping, where tobacco is purchased in one country for consumption in another. However, the EESC working group emphasizes the necessitate for proportionality, economic sustainability, and preventing market distortions. A rapid or excessive increase in excise duties could inadvertently fuel smuggling, they warn.

Andris Gobiņš has stressed the importance of reducing tobacco consumption due to its impact on public health and healthcare budgets. The EESC working group advocates for a “Less harm, less tax” principle, suggesting that tax policies should reflect the varying health risks associated with different tobacco and nicotine products, allowing Member States flexibility in implementation. According to his EESC profile, Gobiņš is also the President of the European Movement in Latvia.

Debate Continues as Directive Advances

As the European Commission seeks support in the European Parliament to advance the revision of the EU tobacco legislative framework in 2026, intense debate over the directive’s amendments is expected to continue. At the time of publication, attempts to contact Andris Gobiņš for further clarification regarding the potential impact of his amendments on smuggling and state revenues were unsuccessful.

The challenge for policymakers lies in striking a balance between public health objectives and the economic realities of a complex and evolving illicit trade. Strengthened customs controls, increased cross-border cooperation, and a gradual approach to tax increases will be crucial to mitigating the risks and ensuring the effectiveness of the new directive. The future of tobacco control in the EU hinges on addressing the growing threat of smuggling and its far-reaching consequences.

What are your thoughts on the balance between public health initiatives and the potential for unintended consequences like increased smuggling? Share your perspective in the comments below.