Cigarette Tax Evasion

About Cigarette Tax Evasion

Cigarette tax evasion is one of the largest forms of tax crime globally. High cigarette taxes create large incentives for evasion through smuggling, counterfeiting, and illicit manufacturing. The global illicit cigarette trade is estimated at over 600 billion cigarettes annually, approximately 12 percent of total consumption. In some countries, illicit cigarettes represent over 30 percent of the market. New York City, with the highest state cigarette taxes, has an estimated 50 to 60 percent illicit market share. Cigarette smuggling is often linked to organized crime and terrorism financing. The EU has had repeated problems with cigarette smuggling involving major tobacco companies. Philip Morris International paid 1.25 billion to the EU in 2004 to settle smuggling related claims. Japan Tobacco International paid 400 million in 2007. Despite these settlements, cigarette tax evasion remains a major issue.