Estonia - with unemployment high people turn to black market for cigarettes..

January 21, 2011 - As the Tax and Customs Board has made its battle with the black market for cigarettes this year's priority operation, many otherwise jobless citizens in the border town of Narva have turned smuggling into a life source.

The expanding black market is a result of raising the excise tax to the EU minimum, a 20 percent increase implemented in two annual increments beginning in 2011. (European Council Updates Excise Duties On Cigarettes And Tobacco Products..)

The recession and the fact that cigarettes are three times cheaper in Russia has also invigorated illegal sales to a 10-year high, Marje Josing, director of the Institute of Economic Research, told Estonian Television (ETV).

In 2008, authorities seized 1.5 million illegal cigarettes in Narva, Estonia's busiest border point with Russia. By 2010, confiscated contraband tripled to 5 million in the town, as well as another 5 million in the rest of Estonia.

Smuggling has become a profitable industry and an everyday job for some in one of the hardest hit parts of the country that still has over 15 percent unemployment. Smugglers start their workday at five in the morning and are back in Estonia by 21:00. They can easily earn twice the amount they paid to purchase the goods, and buyers still believe they are getting a good deal. In Ivangorod, Russia, a pack of Bond cigarettes costs 50 cents. A legal pack of the same cigarettes costs 2.20 euros in Tallinn (capital and largest city of Estonia).

Authorities believe the smoke trade is now expanding entry from the Latvian border, with Kaliningrad and Belarus being the source regions. (Latvia - are smugglers the leaders in the tobacco market??)

Meanwhile, legal sales of cigarettes have declined from 2.3 billion in 2007 to 1.56 billion in 2010. The state lost a record 51.3 million euros ($69.8 million USD) in tobacco taxes last year.

Euromonitor - Tobacco in Estonia..



Reference: Black Market Smokes on the Rise, Estonia Public Broadcasting, 1/20/2011.

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