On 9 July, the European Anti-Fraud Office (OLAF) announced the dismantling of two international criminal organisations based in Spain that manufactured, distributed and trafficked counterfeit tobacco. Authorities seized more than 20 million cigarettes, nearly 40 tonnes of tobacco, manufacturing equipment, cash, firearms and 18 vehicles. Fifty people were arrested across six Spanish provinces.
Giovanni Kessler, who served as OLAF’s Director-General from 2011 to 2017, praised the operation. In an opinion piece for Euronews, he noted the importance of timely intelligence, close co-operation between national authorities and effective cross-border coordination. Cases of this magnitude require months, even years of investigative work and the ability to follow criminal activity across several jurisdictions.
But this was not an isolated success. Operation NOXIA II, announced in late 2025, resulted in the seizure of 149.5 million cigarettes and more than 105 tonnes of tobacco. Two major operations within a year show both the need for effective enforcement and the existence of a resilient illicit market that challenges authorities.
Persistent market despite enforcement
The longer-term comparison is instructive. In 2016, Kessler’s final full year leading OLAF, KPMG estimated that 48.3 billion illicit cigarettes were consumed across the EU28. That represented 9.1 per cent of total consumption and an estimated €10.2 billion in lost tax revenue. Illicit consumption had fallen 8.8 per cent that year, reflecting stronger enforcement, stable pricing and limited excise increases.
Nine years later, covering the EU27, KPMG estimates that 41.8 billion illicit cigarettes were consumed in 2025, equal to 10.3 per cent of the market. The estimated tax loss had risen to €16.7 billion. The volume has proved remarkably persistent even as the legal cigarette market has contracted.
The picture at the national level is more striking. France consumed 8.96 billion illicit cigarettes in 2016, about 14.7 per cent of its market. By 2025, that had risen to 20.5 billion and 41.4 per cent. In Italy, the direction was reversed: illicit consumption fell from 4.43 billion cigarettes, or 5.8 per cent of the market, to 1.26 billion and 2.2 per cent.
Tax policy by itself does not explain these differences. Geography, enforcement capacity, supply routes and consumer behaviour all matter. France borders several lower-priced markets. But price cannot be dismissed. In 2025, the weighted average price of a pack was €12.54 in France and €5.40 in Italy.
Illicit trade depends on margin. The wider the gap between the legal price and the cost of an illegal substitute, the stronger the commercial incentive. Recent interviews with law enforcement agencies revealed that illicit flows are increasingly driven by price differentials and export demand. Criminal networks are increasingly decentralised, spreading operations across jurisdictions and using smaller shipments and direct-to-consumer channels that are harder to detect and easier to rebuild.
There is a health cost too. OLAF Director-General Petr Klement observed that “while smoking is dangerous, smoking counterfeit cigarettes is even worse”. Counterfeit products sit outside regulated manufacturing and quality-control systems. Their origin and composition are uncertain, while their sale finances organised crime and deprives governments of revenue.
The policy choice is not between public health and enforcement. Both are necessary. The challenge is to pursue health objectives without unnecessarily expanding the opportunity available to criminal networks.
The policy response should be practical: gradual tax increases, proportionate treatment of different products, and illicit-market assessments before major tax rises or bans. OLAF, customs authorities and cross-border intelligence should also target machinery, raw materials, online sales and distribution networks upstream.
OLAF and national authorities can close factories, seize machinery and disrupt supply chains. They cannot, through enforcement alone, close the price gaps that keep rebuilding them. As the EU navigates complex trade dynamics, including its €1bn daily trade deficit with China, the illicit tobacco trade remains a stubborn drain on public finances and public health.
