In recent years, Türkiye has seen a troubling resurgence in the illegal tobacco trade, spurred by changes in regulations and increased customs controls.
While these measures were initially designed to reduce the prevalence of counterfeit and smuggled tobacco products, they have inadvertently enabled the growth of a black market that significantly affects both the economy and local businesses.
As the government grapples with substantial losses in tax revenue, the implications of this underground trade are becoming increasingly evident.
Key points
- Resurgence of smuggling: Changes in regulations and heightened customs enforcement, which previously reduced the trade of counterfeit and smuggled tobacco products to 1.5%, have led to a significant increase in illegal tobacco sales in Türkiye.
- Tax revenue losses: Türkiye is facing an estimated annual tax loss of around ₺100 billion (approximately $2.91 billion) because of the expanding black market for tobacco, which negatively affects public finances.
- Impact on small businesses: Approximately 150,000 small vendors, primarily corner shops and kiosks, are experiencing economic strain as the illegal tobacco trade undermines their revenues and creates unfair competition.
- Historical context: Between 2009 and 2014, the illegal tobacco trade surged to 21% before government crackdowns reduced that figure. However, recent data indicates that the rate of counterfeit and smuggled cigarettes has risen again to 6.5% this year.
- Increase in illegal outlets: The number of illegal tobacco sales points, commonly referred to as “tobacco shops,” has doubled from around 6,000 in 2016 to 13,000 today, underscoring the challenges of enforcement faced by authorities.
- Economic significance: The tobacco industry remains critical to Türkiye’s economy, generating ₺176.6 billion (approximately $5.15 billion) in special consumption tax revenue in 2023. This represents over 20% of the total SCT collected that year and over 4% of overall tax revenues.
The rise in the illegal tobacco trade is straining Türkiye’s economy, adversely affecting small businesses, and eroding government tax revenues.
As authorities confront the ongoing challenge of smuggling, finding effective solutions is increasingly urgent.
