High Tobacco Prices Make Illegal Cigarettes Appealing | Business| Economy and finance news from a German perspective | DW | 29.07.2006
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High Tobacco Prices Make Illegal Cigarettes Appealing

Cigarettes are expensive in Germany. One pack costs four euros ($5), but more than three euros of that are taxes. Many smokers feel pressed to get their hands on illegal cigarettes.

The pack says Marlboro, but who knows what's really inside

The pack says Marlboro, but who knows what's really inside

At an outdoor market in the Czech town of Cheb, just past the Czech-Bavarian border, hundreds of wooden stands pedal top-name brands: t-shirts from Adidas, sunglasses from Prada and purses from Louis Vuitton for a nickel and a dime.

None of what the young Vietnamese stand owners sell is real.

A quarter of the price

While many people snatch up the fakes clothing and accessories, many others are interested in something with a slightly shorter life -- cigarettes. But market strollers won't see them out on display at the border-town market; they have to ask the seller for them directly.

Original Marlboros, for example, are sold here for 18 euros ($23) per carton, but the buyer can usually negotiate down to 12 or even ten euros. In Germany, a carton of original Marlboros costs a steep 40 euros ($51).

Baldiges Aus für Produktpiraterie

Pirated goods at a market in a Czech border town

Like the Louis Vuitton bags, these cigarettes are cheap remakes too. A thorough comparison with a real pack of Marlboros will even reveal mistakes on the health warning labels.

It's no wonder that the cigarette industry is in an uproar. With tobacco tax hikes, tobacco bans and non-smoker protection ordinances, it has already got its back up against their wall.

"You never know what's in them," said Andrea Winkhardt from the Cigarette Industry Association, referring to the pirated cigarettes. "That could include pesticides that may have been used at the tobacco plantation, for example."

Bogus cigarettes more dangerous

Several independent studies have shown that phony cigarettes really are more dangerous than real ones because they may contain low-quality tobacco or even waste products.

However, the cigarette industry is not just concerned about the health of its customers -- it's also got business on its mind. Fake cigarettes aren't sold only on the Czech or Polish border, they're also smuggled into Germany in large quantities, resulting in annual losses in the billions for the industry.

"A smuggled cigarette, which no one pays tax on here, is one less cigarette that we have sold," said Winkhardt.

Zigarettenschachtel mit Steuermarken

These cigarettes have paid their taxes

The more expensive cigarettes become in Germany, the more attractive smuggling and counterfeiting becomes, added Winkhardt. "The five tobacco-tax increases in four years have decreased our profits by one-third."

Open borders for smugglers

The fact that borders within the expanding European Union are becoming more open only makes the fight against smuggling more difficult. Soon, the Schengen Treaty, which removes most border controls between participating EU countries, will also apply to the Czech Republic.

Franz Paulus is a customs investigator in a mobile unit who, until just a few years ago, inspected trucks on the German-Czech border. He and his colleagues would drive civilian vehicles through the border areas and randomly search suspicious trucks.

The sensitive noses of trained tobacco dogs, and sometimes portable x-ray machines, allowed the customers officers to undercover goods hidden throughout the trucks.

"There were cigarettes here, too," said Paulus, pointing to an x-ray image. "He had loaded aluminum scrap in the truck and if you looked from behind or on top, you could only see the aluminum scrap. But he had loaded the cigarettes underneath."

Zigarettenschmuggel boomt.

Customers officers confiscated 735 million smuggled cigarettes last year

Every sixth cigarette smuggled in Germany

Last year, German customs officers confiscated 735 million smuggled cigarettes, most of which were counterfeit. Nevertheless, the smugglers are still a step ahead of the investigators.

The Cigarette Industry Association estimates that every sixth cigarette smoked in Germany has been smuggled in. That denies cigarette companies sales income and the government tax revenue.

German tourists meander through the outdoor market in Cheb, plastic bags full of products in their hands. Many have already discovered the cigarettes there, but they don't have to worry: buying them is not yet illegal.

Each person is allowed to take one carton back to Germany for private consumption, regardless of whether the cigarettes inside are real or counterfeit.

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