Forum: Fight Against Smuggling

Counterfeit cigarettes are now replacing smuggled cigarettes as the main source of Latvia’s illicit tobacco market.

According to a KPMG study, illegal cigarettes accounted for 18.7% of total cigarette consumption in Latvia in 2025, causing at least EUR 74 million in lost tax revenue. For the first time, counterfeit cigarettes (12.9% of consumption) exceeded smuggled cigarettes (5.8%), with two-thirds of all illegal cigarettes consumed in Latvia being counterfeit products.

The study also highlights a broader European trend. Across the EU, illicit cigarette consumption exceeded 10% of total consumption for the first time in more than a decade, while governments across 38 European countries lost an estimated EUR 22.4 billion in tax revenues. Traditional smuggling routes from Eastern Europe are increasingly being replaced by counterfeit production facilities operating within Europe itself, particularly targeting high-tax markets in Western Europe.

A separate SKDS survey found that cigarettes and other tobacco and nicotine products remain the most commonly purchased contraband goods in Latvia. Price remains the main driver: 89% of contraband buyers said they choose illegal products because they are significantly cheaper than legal alternatives. At the same time, 27% of Latvian residents do not consider purchasing contraband goods to be condemnable, indicating that public tolerance toward the shadow market remains relatively high.

Experts also warn about the rapid growth of the illicit market for smoke-free nicotine products, including e-cigarettes and nicotine pouches. Research presented at the forum suggests that illegal suppliers quickly adapt to tax increases, restrictions, and product bans by offering cheaper or otherwise unavailable alternatives, making enforcement increasingly challenging.

Commenting on the findings, Professor Arnis Sauka, Director of the Centre for Sustainable Business at SSE Riga, emphasized that illicit trade has become a broader challenge than lost tax revenue alone:
 

“Smuggling and illicit trade can no longer be viewed merely as lost tax revenue. They are also issues of national security, the rule of law, and fair competition. Every euro that enters the illicit economy strengthens organized crime and weakens the state’s ability to finance security, healthcare, and other vital public services.”

The findings were presented at the 8th National Forum on Smuggling Issues, organized by the Centre for Sustainable Business at SSE Riga in cooperation with SKDS.

Video recording is available below: