Higher tobacco taxes push smokers to contraband cigarettes

An increasing number of German smokers are turning to contraband cigarettes in response to higher tobacco taxes, according to research published on Monday.

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Between 2005 and 2008 the number of untaxed cigarettes smoked in Germany grew from 16 to 20 percent, according to Hamburg Institute of International Economics (HWWI) Director Thomas Straubhaar at a conference in Berlin.

Instead of reducing the number of cigarettes smoked, the tax has only increased the number of illegal cigarettes consumed – some 23 billion, according to Straubhaar.

The tax increase has also created an overall reduction in tax revenue earned on tobacco, HWWI expert Michael Bräuninger said, adding that he expected a continued increase in contraband cigarettes.

According to a study by the DZV German cigarette association presented at the event, the increase means a yearly loss of some €4 billion.

The highest number of banned smokes – most of which come from Poland – are consumed by eastern Germans, where every second cigarette is reportedly untaxed. Meanwhile every fifth cigarette in the state of North-Rhine Westphalia is contraband.

At about €140 per thousand cigarettes, Germany has Europe’s fourth highest tobacco tax after Ireland, England and France.