Higher tobacco taxes and more smuggling in Austria

This examines developments in 38 European countries, including the EU-27 and Austria. Accordingly, after years of standstill or decline, there is a slight increase in smuggled or counterfeit cigarettes in this country. Irregular cigarettes now make up almost five percent of the total market – exactly 4.8 percent or 600 million units (previous year 520 million), which corresponds to 30 million packs. The report cites the tobacco tax increase last year as the reason for the increase. “Austria’s moderate tax policy was effective until 2024 – but the tobacco tax increase in 2025 is showing the first measurable consequences,” it says.

Every eleventh cigarette

In Europe as a whole, 55.3 billion irregular cigarettes were consumed last year (52.2 billion in 2024), which corresponds to eleven percent of the total market in 38 countries. There was a tax loss of €16.7 billion across the EU. Of these, 128 million are in Austria, 12 million more than in the previous year. The tax loss corresponds approximately to the annual budget for the Federal Criminal Police Office and almost the entire budget of the customs office.

Countries with high taxes and strong restrictions or even product bans continue to be particularly affected, with France remaining the leader with 41 percent. This means that the black market in France is more than nine billion cigarettes larger than the entire market in Austria. This is followed by Ireland (35 percent), Great Britain (32 percent) and the Netherlands (22 percent).

“These trends highlight the consequences of high taxation and prohibition-like policies,” the report continued. France in particular caused a stir with new bans. “It turns out that individual countries are actually managing to reduce the proportion of irregular cigarettes through moderate tax policies and evidence-based regulation.” Hungary reduced its black market for cigarettes by 3.3 percentage points. Greece recorded a decline of 3.4 percentage points.

According to the report, the black market in the area of ​​e-cigarettes has now really gotten out of hand. Here, both in Austria and across the EU, around half of all products come from irregular sources.

The factory

Illegal cigarette factories are becoming an increasing problem in Central Europe. Around eight million counterfeit cigarettes were seized in an illegal factory in the industrial district of Lower Austria. “The working and living conditions in such illegal factories are inhumane and similar to forced labor,” says Marc Attinger, General Manager of Philip Morris Austria.

An increase in the number of tobacco products seized during raids on illegal factories, as shown in the KPMG report, confirms the development. From 2023 to 2024, this number almost doubled from 239 million cigarettes to 472 million cigarettes and remains high at 428 million in 2024. According to Philip-Morris, the increase in illegal production can be explained by certain general conditions: production equipment can be ordered on the Internet. Setting up such a system costs around 200,000 euros, and the break-even point is reached after just two weeks of operation.

“After the increase in smuggling in Austria, I am convinced that the tax path that the government has put forward will ensure more stability,” says Attinger. “Unforeseen, drastic price jumps are the turbocharger for the black market.” In Austria, tobacconists would certainly also help to curb illegal trade as a contact point for consumers.