Black market tobacco: Official figures contradict industry estimates

Tobacco exempt from national taxation (TAFE) research[1], led by economists Christian Ben Lakhdar and Sophie Massin (University of Lille), provides a consolidated estimate of the share of tobacco consumed in France that escapes national taxation. Funded by the General Directorate of Customs and Indirect Taxes (DGDDI) and the Interministerial Mission to Combat Drugs and Addictive Behaviors (MILDECA), this work is part of the National Tobacco Control Program 2023-2027, which provides for the implementation of regular, independent, and transparent tools to monitor parallel tobacco markets.

The TAFE study is based on a multidimensional approach combining several data sources and economic analysis tools. The researchers first examined data on departmental tobacco deliveries to tobacconists for the period 2016–2023, from the DGDDI. This information made it possible to compare the dynamics observed between border and non-border departments in order to identify the effects linked to the proximity of countries with lower taxes. At the same time, a behavioral analysis was conducted using the EROPP 2023 survey (Representative Sample of Opinions and Perceptions on Tobacco) and the 2021 Public Health France Barometer, in order to better understand the purchasing practices and profiles of the consumers concerned. Finally, the researchers used a Tax Gap estimation model, consisting of comparing the volumes of tobacco delivered to the volumes declared as consumed, in order to assess the share of tobacco escaping taxation. This approach was supplemented by robustness tests and territorial simulations to validate the consistency of the estimates.

Official results far removed from the tobacco industry's claims

The results of the TAFE study represent independent research, funded by public institutions and conducted using transparent methodology. It provides a robust and scientifically based estimate of tobacco escaping national taxation. Its conclusions are in direct contrast to the figures disseminated for years by the tobacco industry, which tends to exaggerate the scale of the phenomenon to defend its economic interests.

Researchers estimate that the share of tobacco consumed in France that escapes national taxation is between 11 and 20 billion euros of total consumption, or 17.7 billion euros on average. This level, which has remained stable for several years, represents between €2.8 billion and €5.8 billion in annual tax losses. These results confirm that parallel markets, while very real and need to be reduced, are not experiencing the "explosion" often mentioned in public debate, and that they are mainly made up of cross-border purchases rather than smuggling or counterfeiting.

Conversely, studies funded by the tobacco industry—particularly those produced by KPMG on behalf of Philip Morris International—put forward much higher estimates, estimating parallel trade at nearly 49% of French consumption. These studies, regularly cited by manufacturers in their communication campaigns and public statements, lack methodological transparency: their data sources are not public, definitions of "illicit" trade vary by country, and the assumptions made about purchasing behavior are not based on any independent survey. Several researchers and institutions, including the European Commission, have already highlighted the methodological limitations of these studies, which often conflate legal cross-border purchases with illicit sales.

The researchers point out that the tobacco industry's alarmist communication about parallel markets is part of a broader strategy aimed at influencing public policy, particularly tax policies, and delaying public health measures. By brandishing the threat of a supposed explosion in illicit trade, manufacturers seek to dissuade governments from increasing taxes, while diverting attention from their own business practices, particularly the deliberate oversupply of border areas that encourages cross-border resales.

Territorial differences which are explained above all by border proximity

The TAFE study highlights significant territorial heterogeneity in the distribution of tobacco escaping taxation. Border departments, particularly those located in close proximity to countries with lower taxation—such as Moselle, Nord, Pas-de-Calais, Bas-Rhin, Haut-Rhin, Pyrénées-Atlantiques, and the Territoire de Belfort—recorded a particularly marked decrease in the volume of tobacco delivered to tobacconists. This drop in volume results from the decline in smoking prevalence in France. In border areas, the decrease exceeds 45% over the period studied, compared to approximately 25% in non-border departments. These differences between the different areas reflect a structural phenomenon: the availability of lower-cost tobacco products on the other side of the border leads a proportion of French smokers to switch to these purchases in shops on the borders of neighboring countries.

In value, tobacconists experienced an increase in their income from the sale of tobacco products during the period (+27% because the decrease in volume was less than the increase in the value of the prices of the products on which they are paid). On the other hand, in the border departments, the decrease in legal sales was more than 13 % between 2016 and 2023. This observation underlines that the fluctuations observed in national sales statistics do not necessarily reflect a change in consumption, but above all a geographical redistribution of purchases.

The lockdown in spring 2020, linked to the Covid-19 pandemic, provided a real-life test of this hypothesis. During the period of border closures, tobacco sales in border departments increased significantly, reflecting the shift in cross-border purchases to the legal French network. As soon as the borders reopened, volumes declined again, confirming the price differential and the impact of cross-border purchases on France's tax shortfall.

To quantify these differences, the researchers conducted territorial simulations. If all French departments had experienced the same trend as Vendée—the region with the smallest drop in deliveries—national sales would have been approximately 7,000 tonnes higher. Conversely, if all departments had experienced the same trend as Moselle, delivered volumes would have been approximately 12,000 tonnes lower. These statistical models estimate that the share of tobacco purchased outside the legal network is between 11,100 and 16,100 of delivered volumes, confirming the predominance of the geographical factor.

Thus, far from a national black market dynamic, the results of the report show that TAFE (tobacco escaping national taxation) mainly corresponds to individual cross-border purchasing behaviors deliberately maintained by the over-supply of border markets by tobacco manufacturers. This observation is consistent with the conclusions of the French Public Health Barometer, which shows that nearly 15% of smokers report purchasing their tobacco in a neighboring country, compared to less than 1% who report obtaining it through illicit or street channels. The responsibility for the loss of tax revenue therefore results not from uncivil behavior but rather from a practice of manufacturers circumventing delivery markets.

The profile of tax-free tobacco buyers sheds light on a public debate parasitized by the industry

The TAFE study provides unprecedented insight into the profile of tobacco consumers who avoid national taxation and their motivations. By combining data from the 2021 French Public Health Barometer and a specific survey of 303 smokers who make part of their purchases outside the network, the researchers paint a nuanced picture, far from the stereotypes often conveyed in public debate.

Tax-exempt tobacco purchasers are mostly regular smokers with a moderate to high level of tobacco addiction. They most often belong to privileged socio-professional categories and reside primarily in border or urban areas. The phenomenon is therefore not marginal or exclusively linked to precariousness: rather, it reflects an adaptation of purchasing behaviors in the face of tobacco price differences between European countries. Contrary to some preconceived ideas, neither income nor education level appear to significantly influence the propensity to purchase tobacco outside the legal network.

The motivations expressed by these consumers confirm this logic: price remains the main determinant (74 % of respondents), but other factors come into play, such as the frequency of trips abroad (35 %), the inconvenient opening hours of tobacconists (18 %), or even the desire not to "enrich the State". These justifications reflect a form of normalization of the use of these parallel purchases: 67 % of respondents say they do not feel they are committing fraud, although they are aware of the regulations in force.

These results directly contradict the industry narrative that portrays these consumers as unwitting participants in the illicit trade or as victims of tax increases. For the National Committee Against Tobacco (CNCT), these data constitute an essential tool for objectifying public debate and countering the misinformation propagated for several years by tobacco manufacturers. By emphasizing a supposed explosion in illicit trade, the latter seek to weaken tax policies and divert attention from real public health levers.

©Generation Without Tobacco

AE