New study links tobacco tax hikes to surge in Greece’s illicit trade
A recent study by the European Policy Information Center (EPICENTER) has drawn renewed attention to Greece’s ongoing struggle with illicit tobacco trade.
According to the report, Greece now ranks fourth among European nations in the consumption of illegal and counterfeit tobacco products, with an estimated 25% of all tobacco consumed originating from the black market.
While rising tobacco taxes are often used as a tool to reduce smoking rates and increase government revenue, the study warns that these measures may be having the opposite effect—fueling the growth of the underground tobacco market instead.
High taxes, low returns
The EPICENTER report highlights a worrying trend: for every €1 increase in tobacco retail prices driven by taxation, the share of black market tobacco may rise by 5% to 12%. While well-intentioned, such tax policies can lead to unintended consequences, including lost tax revenues and the enrichment of criminal networks.
A complex problem in Greece
Although high prices are a factor, the report stresses that Greece’s illicit tobacco problem cannot be attributed to taxation alone. Several other structural and systemic issues contribute to the scale of illegal trade in the country:
A weak tax compliance culture
Institutional gaps and enforcement challenges
Porous borders that facilitate smuggling
Proximity to countries with lower tobacco prices
These factors, the study suggests, create an environment where illegal tobacco trade can thrive.
Geography and corruption: Less influence than expected
Surprisingly, the study finds that geographic proximity to traditional contraband hubs, such as Russia, Ukraine, and Belarus, is no longer a dominant factor in illicit tobacco flows. Once considered central to the trade, these regions have diminished in influence.
Moreover, there is no consistent link between perceived corruption and the size of a country’s black market. Some countries with high corruption perceptions have relatively low levels of illicit trade, while others with low corruption indicators struggle with widespread illegal tobacco use.
A warning to policymakers
Dr. Christopher Snowdon, lead author of the report and curator of the Nanny State Index, offers a clear message: “It’s delusional to believe that taxation doesn’t significantly impact the illegal tobacco trade,” he says. “When legal prices rise too high, demand shifts underground.”
As Greece continues to face economic challenges and works to align public health policy with fiscal goals, the findings of this report offer a timely reminder of the complex trade-offs involved in tobacco regulation.
