Greece can save €1bn a year by eliminating contraband tobacco

Cash-strapped Greece is expected to provide details about its reform proposals, including tobacco and fuel smuggling, in the coming weeks to obtain future bailout funds.

But a Euromonitor report states that Athens could save €1bn (£721m, $1.1bn) a year if it eliminates contraband tobacco.

Euromonitor, in the report, estimated that Greece could lose over €1bn in tax revenue from the sale of illegal cigarettes by 2019.

The nation lost an estimated €740m in revenue in 2014, up from €565m in 2013.

Euromonitor said illegal trade accounted for 21% of all cigarettes consumed in Greece in 2014, up from 18% in 2013.

Euromonitor's calculations are based on the average price for a pack of cigarettes in Greece, which was €3.80 in 2014, and the average tax burden per pack, at 85% of the tax inclusive of the retail sales price.

Booming trade

Shane MacGuill, tobacco analyst at Euromonitor, commented: "This growth has been fuelled by excise and industry-driven price increases and is fed by the expanding availability of illicit white cigarettes from the United Arab Emirates [UAE] and eastern Europe for which Greece acts as a transit point to the wider European region," said Shane MacGuill, tobacco analyst at Euromonitor.

Branded cigarettes manufactured for the purpose of smuggling are referred to as 'illicit whites'.

MacGuill added: "Further excise hikes and the continuing use of Greece as a transit hub means penetration is likely to reach and exceed 25% by 2019.

"The government and industry must also move to dampen domestic demand for illicit products through moderate tax increases and educating Greek consumers about the nature of the illegal cigarette trade.

Tough task

"In 2014, the Greek tobacco industry, with the support of official agencies, launched a campaign with the slogan 'Say No to Illicit Tobacco Products' – something that represents a start but one feels it will take more than slogans to rechannel this revenue to the public good."

Tobacco smuggling was mentioned in a list of reforms that finance minister Yanis Varoufakis submitted to eurozone officials in February as part of a deal to secure an extension on Greece's €240bn rescue deal.

Greece consumed some three billion cheap white cigarettes in 2013 and according to KPMG's Project Sun, the main illicit white brands seen in the Greek market were Cypriot firm Explosal's Raquel, and Gold Mount, produced in the Jebel Ali Free Zone, in the UAE.