New Study Highlights Impact on Tax Revenue
Nearly one-third of cigarettes consumed in the Region of the Americas in 2025 were illicit, as revealed by a recent study commissioned by Philip Morris International. Conducted by KPMG LLP, the research found that 31.9% of cigarettes in 11 countries, including Canada and several Latin American nations, came from illegal markets.
Consumption of an estimated 77 billion illicit cigarettes in these areas led to approximately USD 8.5 billion in lost tax revenue. This positions the region as a global hotspot for illicit cigarette consumption, with rates more than double the global average of 15%.
Effective policymaking is crucial to combat the trade, according to Marco Hannappel, President of Latin America & Canada at Philip Morris International. He emphasised, “Reports like this are relevant not only to highlight the illicit cigarette trade problem, but also to invite authorities to search for solutions, which promote technological innovation, intelligence gathering, and data-driven action.”
Impact and Implications
Extreme regulations and steep tax hikes may inadvertently fuel the illicit tobacco trade by driving consumers towards cheaper, illegal options. Countries such as Brazil, Panama, and Ecuador are particularly affected, with illicit cigarettes comprising 54% of the illicit market in Brazil and over 80% in Panama and Ecuador.
Illicit Whites, legally produced cigarettes intended for smuggling, dominate the illegal market, representing 73% of all illicit cigarettes consumed. Tackling this issue requires a coordinated approach among governments, stakeholders, and enforcement authorities.
The findings were unveiled at a Washington, D.C. event hosted by the Council of the Americas, where experts discussed potential strategies to address the challenges posed by the illicit trade.
Hannappel highlighted the broader implications of the trade, stating, “These are resources that could otherwise fund public goods such as healthcare, education, infrastructure, and enforcement capacity. Instead, they are captured by an illicit market.”
Philip Morris International advocates for partnering with governments to tackle this problem. The company supports balanced regulations that allow the commercialization of new smoke-free products, which could indirectly decrease the illicit cigarette trade.
Resilience of the illicit cigarette market underscores the growth of an unregulated parallel economy in the Region of the Americas, excluding the U.S., which has the highest rate of illicit cigarette consumption worldwide.
Resources lost to illicit markets could otherwise support public goods, including areas such as healthcare, education, and infrastructure. These sectors could benefit from the estimated USD 8.5 billion in lost tax revenues.
