Multi-million-dollar tax fraud

Smoked Out! Tax Authorities Raid Illegal Cigarette Factory

Black-market cigarettes were being churned out nonstop.(Bild: BMF)

With rising prices for tobacco products, even the cigarette mafia’s machines for black-market cigarettes are running hot. Now, local customs investigators have scored a massive victory—eight million cigarettes were seized at a counterfeit factory in the Industrial District (Lower Austria).

The illegal market for counterfeit cigarettes is booming, with the EU as the main target. The reasons for this criminal trend are tax hikes and product bans. Since 2015, the number of counterfeit cigarettes has risen to 13 billion. Naturally, this also means the Austrian government is losing massive tax revenue…

Now, customs investigators have raided a large illegal cigarette factory in the Industrieviertel district of Lower Austria, near the border with Burgenland. The operation was preceded by weeks of investigations, including aerial surveillance using drones.

Black-market cigarettes produced on an assembly line.(Bild: BMF)

Slovakian and Polish customs authorities were also involved in the operation. Acting on orders from the Public Prosecutor’s Office for Economic Affairs and Corruption, the raid was launched: Around 40 tax officials, along with international investigators, stormed a completely self-sufficient facility housing a fully operational production line. This included makeshift and very spartanly furnished sleeping quarters for the illegal workers.

40 million cigarettes produced even before the raid
To minimize noise, the entire warehouse was lined with soundproofing material. Inside, 30 pallets containing approximately 40,000 cartons of filtered cigarettes were being produced at a rapid pace and were ready for pickup. The tobacco tax on the eight million confiscated cigarettes amounts to 1.5 million euros; the total loss to the state treasury exceeds six million euros.

Illegal production of counterfeit cigarettes ran like an assembly line in the completely self-sufficient factory hall.(Bild: BMF)

(Bild: BMF)

The illegal workers lived in dormitory-style rooms like these.(Bild: BMF)

Based on the current state of the investigation, it is estimated that even before the major raid, the illegal counterfeit factory had already produced more than 200,000 cartons of cigarettes—an incredible 40 million cigarettes—for the European black market.

In addition, dozens of pallets of filter cardboard, filter paper, aluminum foil, and professional cigarette pack boxes in standard brand sizes were found on site. And: On the trailer of a truck was another cigarette production machine, which apparently came from a second illegal factory—also seized!

In the interest of honest taxpayers, the rule is: zero tolerance for tax and duty fraud. Illegal cigarette manufacturers harm the state and pose a high risk.

SPÖ-Finanzminister Markus Marterbauer

Bild: APA/GEORG HOCHMUTH

This investigative success is impressive proof of the effectiveness of our law enforcement agencies.

SPÖ-Justizministerin Anna Sporrer

Bild: APA/GEORG HOCHMUTH

Three suspects were found at the scene and arrested. One person has been remanded in custody. Meanwhile, the investigation into the cigarette mafia pulling the strings behind the scenes is in full swing. The perpetrators face heavy fines or prison sentences of up to four years. For SPÖ Finance Minister Markus Marterbauer, “in the interest of all honest taxpayers, there is zero tolerance for tax and duty fraud.”

The health risks for smokers are also high
Illegal cigarette production would harm the state and also pose a high health risk to smokers. Red Justice Minister Anna Sporrer highlights the cooperation between public prosecutors, customs, and international partners: “This investigative success is impressive proof of the effectiveness of the judicial authorities and enables us to decisively confront organized crime.”

And for ÖVP State Secretary for Finance Barbara Eibinger-Miedl, the consistent uncovering of illegal structures ensures “fair competitive conditions” for Austria as a business location.