Losses to the state budget from illicit cigarette trade reached 67 million euros in 2024, marking a 31% increase compared to the previous year, according to a study by audit and consulting firm KPMG presented at the national forum on smuggling by Philip Morris Latvia public affairs head Guntars Grīnvalds.
The research shows that the illicit cigarette market in Latvia reached 18% of total consumption in 2024, up 4.5 percentage points from 2023. By comparison, smuggling grew by 2.2% in Lithuania, while in Estonia it actually fell by 4.2%. Across Europe, the sharpest growth was recorded in the Netherlands (+10.2%), Hungary (+5.6%), as well as Finland and France (+4.4%).
Although overall cigarette consumption in Latvia declined by 2%, the use of counterfeit and contraband cigarettes surged to 340 million units, up 31% year-on-year.
Key findings for Latvia in 2024 shows that main source is Belarus, accounting for 50% (180 million units) of all illicit cigarettes, +12% vs 2023. Counterfeits made up 41% (140 million units) of illicit supply, up 40% from the previous year. Budget loss is estimated 67 million euros, directly impacting public finances and national security.
Grīnvalds emphasized that despite tighter controls on the Belarusian border since Russia’s war in Ukraine,
contraband flows persist, posing both economic and security risks.
Another worrying trend is the rise of counterfeiting and illegal production both in Europe and in Latvia.
He also warned against simplistic approaches to excise tax policy: “Experience shows that +5% in an Excel table does not equal +5% in the state budget. Latvia needs a balanced excise tax and regulatory policy, learning from both positive and negative experiences abroad.”
Grīnvalds argued for a differentiated taxation approach: higher excise duties for traditional cigarettes, but lower for less harmful alternatives, to encourage smokers to switch away from the most dangerous products.
The National Forum on Combating Smuggling – Challenges and Achievements was organized by SSE Riga’s Sustainable Business Centre in cooperation with the SKDS research centre.
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