Criminal gangs are earning profits equal to almost a thousand times the fines imposed on smugglers by the courts, according to the tobacco industry.

The tobacco industry is to put special coding on cigarette packets in an effort to cut down on the amount of illegal tobacco smuggled into Ireland — which cost the State an estimated €240m in lost revenue last year.

Reduced income as a result of the recession and high levels of government duty on a 20-pack of cigarettes is driving tobacco smuggling, according to manufacturers.

Cigarette smuggling cost the Government €556m in lost taxes and duty last year, it was revealed today.