Riga, Latvia – Efforts to curb tobacco use across the European Union are facing an unintended consequence: a surge in smuggling that is costing governments billions of euros and potentially bolstering the regime in Belarus. Amendments to the European Commission’s Tobacco Tax Directive, aimed at raising excise duty rates and discouraging consumption, are running head-to-head with a growing black market for cigarettes and e-cigarettes, raising concerns about both public health and national security.
The situation is particularly acute in Latvia, where smuggled cigarettes now account for 23% of the market, and illegal e-cigarettes craft up a staggering 40%. This illicit trade resulted in losses of 67 million euros for Latvia in 2024 alone – a 31% increase from the previous year, according to official data. Across the EU, uncollected excise and VAT revenues from the illegal cigarette trade totaled approximately 14.9 billion euros, with 39.2 billion cigarettes consumed illegally, representing 9.2% of the total market, according to a report by Oxford Economics.
The proposed directive, currently under consideration by the European Parliament, seeks to expand the scope of tobacco taxation to include e-cigarette liquids, chewing tobacco, nicotine pouches, and raw tobacco. It also promises improved monitoring of cross-border shopping, where consumers purchase tobacco in lower-tax countries and consume it elsewhere. But, experts warn that a rapid increase in excise duties, without corresponding enforcement measures, could exacerbate the problem of smuggling.
A Growing Security Threat
Beyond the financial losses, authorities are increasingly concerned about the national security implications of the illicit tobacco trade. A significant portion of contraband cigarettes originates in Belarus, where officials allege the trade has become a key component of the Lukashenko regime’s economic model. By failing to effectively combat smuggling, European nations may be inadvertently supporting an authoritarian government.
“By failing to radically curb this smuggling, we indirectly support the Belarusian dictatorship,” a source familiar with the investigation stated. Latvian customs authorities seized nearly 12 million contraband cigarettes last year, and in early February, 1.5 million illegal cigarettes were confiscated from traders in the Dārziņi district of Riga, demonstrating the scale of the problem.
Balancing Public Health and Economic Realities
The drive to increase tobacco taxes is rooted in public health concerns. The European Economic and Social Committee (EESC) has largely supported the directive, with 24 out of 29 amendments submitted by EESC member and President of European Movement Latvia, Andris Gobiņš. The goal is to make tobacco products less affordable and less attractive to consumers, ultimately reducing rates of smoking and related illnesses.
However, the EESC working group has also emphasized the require for proportionality, economic sustainability, and the prevention of market distortions. They caution that rapid or excessive tax increases could fuel smuggling, and advocate for a gradual approach coupled with strengthened customs controls and cross-border cooperation. The principle of “Less harm, less tax” – tailoring tax policies to reflect the varying health risks associated with different nicotine products – is also gaining traction.
The Unseen Costs of Illegal Products
While the health risks of legal tobacco products are well-documented, there is a significant gap in public understanding regarding the dangers of illegal cigarettes and e-cigarettes. These products often lack quality control and may contain unacceptable levels of heavy metals, toxins, and carcinogenic substances, as well as excessive nicotine. The lack of data on health outcomes related to illegal tobacco consumption is a growing concern for public health officials.
Ongoing Debate and Future Steps
As of February 18, 2026, it remains unclear how the amendments submitted by the EESC will ultimately impact efforts to reduce smuggling and maximize state revenues from tobacco excise duties. Attempts to reach Andris Gobiņš for clarification were unsuccessful at the time of publication.
The European Commission is currently seeking support in the European Parliament to advance the revision of the EU tobacco legislative framework. Intense debate over the directive’s amendments is expected to continue as policymakers grapple with the complex interplay between public health, economic realities, and national security concerns. The next key step will be a vote in the European Parliament, scheduled for later this year, where the fate of the directive will be decided.
This is a developing story. Readers are encouraged to share their thoughts and experiences in the comments below.
