High tax loss

Austrians smoke fewer legal cigarettes

At 12.1 billion cigarettes, we smoked five percent fewer cigarettes last year than in 2022, according to a study by KPMG. However, this only applies to cigarettes legally purchased and taxed in Austria. Home imports and counterfeits are on the rise, especially in the case of smoking alternatives.

A total of 500 million cigarettes reached consumers untaxed. In mathematical terms, this means that every adult smokes three illegal packets per year. Alternatives such as tobacco sticks for heaters are also increasingly crossing the border into Austria. These are even correctly purchased abroad, explains Özlem Dikmen, the new head of Philip Morris in Austria: "Almost 40 percent of tobacco sticks are not bought in our tobacconists. Consumers buy them across the border because not all innovations and new varieties are immediately available here due to the long approval process."

According to Dikmen, if all forms of "imports" are added together, the tax authorities recently lost almost 106 million euros in taxes on cigarettes alone, and this figure is likely to rise to a further 75 million euros by 2025 alone. Sales are also somewhat depressed because the number of smokers is steadily declining by around one to two percent each year. Those who light up are increasingly turning to tobacco heaters, e-cigarettes, nicotine pouches and other alternative options. 

They already account for almost 12 percent of the domestic market, "for us in the Group it is already 38 percent internationally, and the target is even 50 percent. Of course, we would also like to achieve this faster in Austria." No wonder, as tobacco heaters such as "IQOS" already account for 40 percent of Philip Morris International's net sales.

The EU's planned recommendation to ban smoking in restaurants, as announced by the "Krone" newspaper, is viewed critically. "Austria is a tourist and hospitality country, and the 4600 tobacconists are also at stake. We must first assess the economic consequences before introducing further regulations. It is a misconception that people will then stop smoking, they will just stay at home," warns Dikmen.

Özlem Dikmen, Head of Philip Morris Austria: "40 percent of tobacco sticks are bought abroad."(Bild: Julia Wimmerlin)

The illegal market is also growing across Europe. According to the study carried out by consultants KPMG, Europeans smoked 525.4 billion cigarettes last year. That was a drop of 2.6 percent. However, the proportion of counterfeit or non-taxed smoking products in Europe climbed to 52.2 billion, i.e. a tenth of the legal quantity. This was an increase of 5 percent compared to the previous year and the highest figure recorded to date. 

The tax loss rose even more sharply to an estimated 16.7 billion euros. The French in particular are "to blame" for this, as they already consume one in three cigarettes as counterfeit or smuggled goods due to an increase in tobacco tax. The British, Greeks and Ukrainians are also increasingly turning to the gray and black market.