Spain’s black market tobacco hits 10.2% as tax hikes backfire
Spain is grappling with a surge in illicit tobacco use, with the black market now accounting for 10.2 per cent of the market. This rise, which brings usage levels back to those seen in 2017, has resulted in the government missing out on €467 million in the first six months of the year.
The increase in illegal tobacco use is linked to two significant tax hikes in 2025. Despite Spain's moderate tobacco prices and controlled market, the increase has led to a 10.2 per cent rise in black market tobacco use. Many smokers are seeking cheaper alternatives, turning to non-Spanish sources for their cigarettes.
Smuggling remains heavily focused on the border with Gibraltar. In the first eight months of 2024, Spain's customs authorities seized over 3.5 tonnes of contraband tobacco, a 72 per cent increase from the previous year. This surge in illicit tobacco use has serious implications. Illicit tobacco products can be dangerous as they skip quality controls and may fund other criminal activities.
Spain faces a dilemma in balancing tobacco tax policies to reduce smoking without boosting the illegal market. The government is missing out on substantial revenue due to illicit tobacco, with much of it coming from nearby areas like Gibraltar, Andorra, and Portugal. As the black market continues to grow, Spain must address this issue to protect public health and secure its tax base.
