The illegal trade in tobacco products in Cyprus has taken on very large dimensions mainly due to inflation which, in connection with the historically low exchange rate between the Turkish lira and the euro, leads more and more smokers to supply tobacco products through Occupied. The problem arises from the ever-increasing quantities that are illegally trafficked either through roadblocks, or -mainly- from unguarded parts of the dead zone and according to the authorities, it is more intense in areas adjacent to the Occupied Territories, such as Pyla and Astromeritis , causing significant damage both to the commercial chain and to public revenues, due to lost taxes.
It is indicative that the seizures of large quantities of duty-free tobacco products by the Customs Department are now an almost daily phenomenon with the total customs tax burden, from the beginning of 2023, to exceed €170,000.
The issue of the increasing illegal trafficking of products from the occupied territories to the free areas, with the consequent loss of revenue for the economy of the Republic of Cyprus, has also recently occupied the Parliamentary Trade Committee, with the MPs urgently requesting the adoption of stricter measures, both preventive and and suppressants. The authorities presented relevant data to the Parliament, while the KEBE also highlighted the issue in the meeting it had with the Minister of Finance, at the beginning of May, pointing out that it has had a very negative impact on the legal trade, bringing an upsurge in the illegal trade in tobacco products.
As the Chamber pointed out in its memorandum to the Minister, tobacco products are among the most taxed items and are a major source of state revenue. Thus, as the phenomenon of illegal tobacco trade has been strongly observed in recent years, the state has lost tens of millions of euros.
Although this is an international problem, with the loss of government revenue at EU level estimated at 10 billion euros per year, however in Cyprus due to the political problem and unfair practices followed in relation to the Green Line Regulation, it is even more noticeable. In 2022 alone, the Republic of Cyprus lost 35 million euros as a result of the smuggling of tobacco products, while estimates for 2023 are even worse. Furthermore, cigarette smuggling poses serious risks to public health, as contraband cigarettes are of dubious origin and quality.
The holes in the dead zone
Based on an annual survey of tobacco products, 15.5% of cigarettes consumed in 2022 in free zones were smuggled products, which did not pay taxes in the Republic of Cyprus. Of these, 74% come from areas not controlled by the Republic of Cyprus, 22% arrive duty-free, while 4% come from other sources. The percentage of 15.5% in illegal tobacco products is one of the highest in Europe, while it is also increased by 57% in a five-year period (2018). According to the same research, historically the largest quantities of contraband tobacco products are found in areas adjacent to the dead zone (Nicosia, Larnaca), while they decrease as we move away from it (Limesos-Paphos).
Non-deterrent penalties
The KEBE has proposed a series of measures to the Customs and the Ministry of Finance, mainly the tightening of the penalties for those who commit illegal acts, as the existing ones prove to be non-deterrent, since very often, the accused pay the fine and commit illegal acts again and continue to be involved in similar cases.
Market players further point out that it is extremely important to strengthen controls both along the dead zone and at roadblocks, as well as inside the country on the basis of relevant information, in order to shield the legal trade that suffers ever-increasing damage from the smuggling of tobacco products. Equally important they consider informing the public about the consequences of smuggling, both in health and in the economy.
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