Tobacco Taxes and Illicit Trade in the EU

Research consistently finds no systematic relationship between higher tobacco taxes and increased illicit trade. This policy note illustrates this conclusion using the most recent data on tobacco consumption and taxation in the EU. Rather than serving as an argument against tax increases, concerns about illicit trade point to the need for complementary enforcement and supply-chain measures to secure the full fiscal and public health benefits of higher tobacco taxation.

Keywords: Illicit trade, Taxation, Tobacco

JEL classification: H25, H26, L66

Countries covered: European Union