British American Tobacco boss: Europe risks becoming Australia on illicit trade

Europe’s push for sharp tax hikes on tobacco and alternative products will fuel illicit trade, as seen in Australia, a senior British American Tobacco (BAT) executive has warned, while pledging to keep at least smokeless alternatives available and affordable – for health reasons.

“Australia is the worst example in the world, as 80% of the tobacco and nicotine market is illicit. The loss to taxpayers since 2019 is somewhere around, if I remember rightly, eight to nine billion Australian dollars,” BAT’s Chief Commercial Officer, Kingsley Wheaton, told Euractiv.

He said these figures are being driven by “exceptionally high excise taxes and extreme regulations.”

EU policymakers and the tobacco industry have been on a collision course since June, when the European Commission proposed a revision of the Excise Tax Directive that would see a 139% increase in cigarette taxes, alongside steep hikes for alternative products such as e-cigarettes, heated tobacco, and nicotine pouches.

The EU has pledged to become smoke-free by 2040, aiming to reduce tobacco and nicotine consumption to below 5%. Both Brussels and the World Health Organisation insist that taxation, combined with strict regulation, is key to achieving this goal.

Tobacco use is linked to nearly 700,000 deaths annually in the EU, according to Commission data, making it the bloc’s largest avoidable health risk.

The average price for cigarettes in Australia is about €35. The country is not only strict on taxation; it is also among the global leaders in regulating tobacco and vaping, having introduced plain packaging and display bans. E-cigarettes can only be sold in pharmacies.

According to government data, smoking has declined significantly, with daily rates falling to 8.3%.

“I fear that what they [Europeans] will do is turn a blind eye to the illegal market. This is the Australia story through and through. They look at the legitimate market and say, ‘We’ve controlled it,’ but they don’t deal with the criminal operators and non-compliant vapes,” Wheaton warned.

According to the BAT executive, illicit traders can still profit even if 24 out of 25 shipping containers are seized, as just one successfully reaching Australia is enough to turn a profit.

Commission pushes back

The European Commission doesn’t accept this argument. An EU source told Euractiv that the current illegal trade in Europe is largely due to tax differentiation between member states. The proposed revision, the source explained, aims to consolidate the single market over the long term.

Harmonising taxes would also help reduce so-called “cross-border shopping” – for example, French consumers buying tobacco products in neighboring countries.

However, enforcing laws and securing borders remains the responsibility of national governments. France, which has imposed the EU’s highest domestic excise tax on tobacco and is pushing for similar levels across the bloc, currently faces Europe’s largest illicit tobacco market.

Wheaton acknowledged that smokeless nicotine products are not risk-free but argued they are significantly less harmful than continued smoking.

“It’s widely accepted that when you don’t burn something, you don’t create the same toxicological profile as when you do,” he said.

He called for a fiscal policy in which cigarettes become progressively more expensive but smokeless alternatives remain accessible and affordable for adult smokers.

“We don’t want packaging and labelling that’s irresponsible. We don’t want irresponsible flavours. We want nicotine ceilings. We want retail licensing,” Wheaton said.

The Dutch Commissioner added that nicotine products damage blood vessels, impair vascular function, and stimulate tumour growth.

(bms, aw)