Blümel: 2020, the year of coronavirus, saw less tobacco smuggling and more legal sales Significant decline in cigarette smuggling; revenues from tobacco tax at record level of EUR 1.99 billion
The Ministry of Finance has been taking stock of cigarette and tobacco smuggling in 2020. Over this year, during which travel was reduced to a minimum, cigarette seizures by the Customs Administration fell compared with the previous year, from 2,062 seizures to 995, a decline of 52%. The number of impounded contraband cigarettes fell by 42%, from 4.99 million 22.89 million. In addition to cigarettes, 15.4 tonnes of smoking tobacco were seized at two illegal cigarette factories. Around 60% of the contraband goods were picked up by officers of the Eisenstadt Customs Office at Vienna Airport. The value of the cigarettes impounded fell compared with the previous year from EUR 500,000 to EUR 355,000.
As Finance Minister Gernot Blümel affirms, "The illegal trade in cigarettes harms honest businesses and, as a result of tax evasion, constitutes an act of fraud against the Republic of Austria. Customs Office Austria is putting a stop to such illegal schemes, and in the process is also protecting the health of consumers against unknown and particularly toxic constituents. We are determinedly continuing the fight against cigarette smuggling, notwithstanding the coronavirus pandemic."
Record revenues from tobacco tax as a result of lower quantities of contraband
In the east of Austria, the travel restrictions aimed at combating the Covid-19 pandemic meant a rise in the sale of legal tobacco goods and excise duty revenues. In the west of Austria, on the other hand, sales of tobacco goods and excise duty revenues fell, primarily due to the absence of German tourists. As a result of the travel restrictions, so-called 'ant smuggling', the smuggling of very small consignments, has also declined.
Overall, tobacco tax revenues grew in 2020 by 5% to a record level of EUR 1.99 billion. The number of legal cigarettes sold grew by 4.2% to 12.23 billion, while sales of legal fine-cut tobacco rose by 14.9% to 776.17 tonnes. Another significant factor in the shift from illegal to legal sales was that tobacconists remained open during lockdown and the availability of legal tobacco products was thus assured.
The trend towards illegal cigarette factories in the European Union
An increase in illegal cigarette production facilities is currently observable within the European Union. The separate individual components that make up a cigarette can be imported into the EU at less risk and cost, since filters, cigarette papers and raw tobacco are exempt from excise duty and thus not subject to specific monitoring.
"Over the past few years, the impounding of large quantities of cigarettes, often in containers from China, has been the order of the day. It is now the case that an increasing number of illegal cigarette factories are being operated by East-European gangs. We shall however continue to ensure without fail that we nip such factories in the bud and bring the perpetrators to justice," declares Gernot Blümel. In Austria, customs investigators uncovered two illegal cigarette factories during 2020. In September, customs officers in Bruck an der Leitha impounded part of a production line for the illegal manufacture of cigarettes, along with 2.4 tonnes of smoking tobacco. Investigations revealed that a complete production line for the illegal manufacture of cigarettes was to be set up in the warehouse, but this was however presumably considerably delayed as a result of the restrictions imposed due to the pandemic, and finally thwarted by the intervention of customs investigators. In November, customs officers in the Viennese district of Floridsdorf seized a complete production line for illegal cigarette manufacture as well as 13 tonnes of smoking tobacco and other raw materials for the production of illegal cigarettes.
The perpetrators are becoming ever more professional in their approach. For instance, at one of the cigarette factories, signal jammers and tracking devices were seized which had been intended to prevent mobile phones from being located and phone calls from being monitored. Furthermore, the perpetrators use encrypted communication apps such as WhatsApp or Signal, which are becoming increasingly difficult to monitor.
International cooperation aimed at combating gangs
The Austrian Customs Administration cooperates with the competent authorities in other countries, including within the framework of Europol, with the aim of combating the illegal cross-border trade in cigarettes. From an international perspective, Ukraine still appears to be a key production centre. Austria serves the smugglers primarily as a hub for reloading and onward transportation to particularly profitable countries such as the UK.
The majority of cases from 2020 have already completed their passage through the courts. The impounded cigarettes have been declared forfeited and, in most cases, both monetary fines and custodial sentences have been imposed, with the payment of compensation also ordered.