Tobacco Asia

18 tobaccoasia Issue 2, 2026 March / April By Thomas Schmid The illicit tobacco trade has emerged as one of the most pressing challenges for governments, law enforcement, and legitimate busi- nesses worldwide. According to Vincent Byrne, an expert in illicit trade at Japan Tobacco International (JTI), "Illicit tobacco now ac- counts for 1 in every 10 cigarettes consumed globally, costing govern- ments an estimated US$50 billion a year in lost excise tax revenue." This staggering figure underscores the scale of the problem, which drains public coffers and fuels organized crime. At the national level, losses are equally devastating. The UK has lost £26.5 billion since 2010, including £2 billion in the past year alone, according to Byrne. France has seen criminal networks siphon off an estimated €35 billion between 2018 and 2023. Byrne empha- sized that this is far from a victimless crime: "Organized crime groups generate vast illegal profits to finance other serious criminal activities, including drug trafficking, firearms smuggling, human trafficking, and, in some regions, terrorism." Market penetration at alarming levels The illicit market share has reached unprecedented levels in many countries. In the UK, it stands at 46%; in France, 54%; in Malaysia, 55%; and in Ethiopia, a staggering 78%. Many other nations face rates between 10% and 20%. Byrne warned that these figures highlight "the urgency of the issue and the need for coordinated global action." Governments hate to admit, but one of the primary drivers of illicit trade is taxation policy. Byrne pointed to research showing a di- rect correlation between steep tax hikes and the growth of illegal mar- kets. "Aggressive increases in tobacco excise in France pushed prices up by 64% between 2017 and 2023, making illicit tobacco -- often sold at a fraction of the legal price -- highly attractive to consumers," he told Tobacco Asia. The Dynamics of the Illicit Tobacco Trade Tobacco Asia's interview with Vincent Byrne of JTI serves as a wakeup call for industry and authorities alike. Seizures of illicit tobacco shipments are increasing in many countries. Credit: ChatGPT Malaysia offers another stark example. A 2015 excise tax hike led to a 42% increase in ciga- rette prices compared to the previous year. The illegal cigarette market share jumped from 37% in 2015 to 52% in 2016. Some sources claimed it even was as high as 75% at one point. Today, illicit products constitute around 56% of the Malaysian market. In Greece, meanwhile, repeated excise hikes drove cigarette prices up by over 50% be- tween the mid-2000s and 2020, pushing the illicit market share from 5% in 2010 to 25% in 2018. By- rne argued that "predictable, long-term, and bal- anced tax strategy helps preserve legal markets and delivers better outcomes for both public revenues and enforcement efforts." The equation is quite simple, really: price legal cigarettes out of consum- ers' pockets -- for whichever "noble cause" – and brace yourself for an illicit tobacco surge of mind- blowing proportions. Corruption as a critical enabler While enforcement failures are not solely due to corruption, Byrne acknowledged that corruption constitutes a critical enabler of illicit trade never- theless. "In some countries, influential business figures or political actors are allegedly involved in large-scale illicit operations," Byrne noted. A strik- ing example came in 2022, when the United States sanctioned Horacio Cartes, the former president of Paraguay and a self-made tobacco tycoon, for what US authorities described as "a concerted pat- tern of corruption." Such corruption undermines deterrence, weakens investigations, and allows criminal networks to operate with impunity. By- rne stressed that where corruption intersects with weak judicial systems, illicit trade becomes deeply entrenched. The illicit supply chain is highly organized and international in scope. Counterfeit products often originate in clandestine factories within the EU and are transported to lucrative markets such as the UK and France. Byrne recalled a recent case: "On February 6, 2026, authorities seized 2 illegal factories in Greece, arresting 52 individuals and uncovering a distribution route supplying the UK and France." Illicit hubs in Eastern Europe, Central Asia, and North Africa feed regional black markets, while large consignments are shipped from Asia and the Middle East to transshipment hubs in Eu- rope and Latin America. Containers from China, Vietnam, Cambodia, and Indonesia often transit the Suez Canal to ports like Rotterdam and Ant- werp, before being rerouted into destination mar- kets. Once inside a country, distribution networks are decentralized and designed for speed. During the Covid-19 pandemic, online sales of illicit ciga- rettes surged, and this shift to digital platforms has persisted, complicating enforcement efforts.

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