Tobacco firm commits €134m to European anti-fraud effort

One of the world’s biggest tobacco companies today pledged €134m towards European efforts to smash the illegal trade in cigarettes.

British American Tobacco (Bat) is joining forces with the European Commission’s anti-fraud office and national enforcement authorities in the 27 EU countries to counter organised crime worth tens of billions of euros a year.

The deal was sealed at a signing ceremony today, two years after Bat approached the Commission with plans to step-up the fight against tobacco counterfeiting and smuggling.

Estimates put annual losses from the smuggling of genuine and counterfeit cigarettes – those with cheap contents and copied brand logos – at about €10bn a year.

European tax and anti-fraud Commissioner Algirdas Semeta told today’s signing ceremony:

“Today’s agreement will help greatly in combating the illegal trade in cigarettes and will send a strong signal to criminals that they have both the authorities and industry working against them.”

Jack Bowles, Bat’s Director for Western Europe, said: “The illicit trade in tobacco is organised crime and is the number one fraud perpetrated in Europe. This is costing member state governments and businesses tens of billions of pounds every year. This is happening at a time when governments around Europe can ill afford to be losing these revenues.”

He said 75 billion cigarettes were smuggled around Europe every year: “To put this into context, 75 billion cigarettes are more cigarettes than are sold in a large EU member state, such as Spain or Poland or the UK.

“This means that close to 13% of all cigarettes sold in Europe change hands illegally. Illicit trade is like an illegal tobacco company having almost 13% of the European market, without obeying any laws.”

Mr Bowles went on: “The co-operation agreement which we have signed today is a proactive and collaborative partnership between government and our company to deal with illicit trade in the EU.

“To demonstrate our commitment to this partnership, and our ceaseless determination to reduce and ultimately eradicate this escalating problem, we shall be contributing €134m over 20 years. This will support the Commission and the member states as they continue to play the lead role in this fight against illicit trade.”

Bat is the world’s second largest stockmarket-listed tobacco group, including the Dunhill, Kent, Pall Mall and Lucky Strike brands.

It said it offered to take action because illicit trade was a major threat to legitimate tobacco companies.

China is the biggest source of counterfeit cigarettes, but significant quantities come from Russia and Ukraine, and illegal factories have been found in some EU countries.

Genuine smuggled cigarettes come from Russia, Ukraine, Moldova and Belarus - countries where prices are so much lower that huge profits can be made smuggling the cigarettes into higher-priced markets.

A third concern is the growth into the genuine production of cheap new brands outside the EU, which are then illegally imported and sold. The Commission says they are becoming an alternative to counterfeit cigarettes, popular with consumers because of their low prices.

Bulk smuggling of cigarettes in container ships is not the only worry - smuggling in lorries, cars, trains, by post and concealed by individuals on their bodies, are all described as a “serious” problem.

In 2008, the seizure of 5.2 billion cigarettes was notified to the Commission’s anti-fraud unit by member state authorities.

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