December 8th, 2009

Black market in cigarettes booms as tax gap with Ukraine fuels smuggling

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The black market for cigarettes is thriving again with the economic crisis after years of decline, according to a survey by market researcher GfK Hungária.

Illegal products have an estimated 10% of the cigarette market. Most smuggled cigarettes come from Ukraine, where lower taxes mean cigarettes are cheaper.

The tax shortfall from the illegal sale of cigarettes is set to reach Ft 20 billion this year, Napi Gazdaság reports. The Finance Ministry expects customs authority VPOP to collect Ft 298 billion in excise taxes this year.

Legal sales are expected to drop for the second straight year in 2009, to 15-15.5 billion cigarettes, from 16 billion in 2008 and 16.5 billion in 2007.

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