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Illicit tobacco consumption in Spain has surged dramatically in the first half of the year, nearly doubling to reach 10.2% of the overall market, according to the latest Empty Pack Survey by Ipsos. This sharp increase reverses a decade-long decline and takes consumption back to 2017 levels.

 

Experts link this rise partly to Spain’s tax increase at the start of the year, which pushed tobacco prices higher and encouraged smokers to look for cheaper options elsewhere. Rocío Ingelmo, Director of Legal and Corporate Affairs at Altadis, pointed out the influence of nearby markets with lower prices, emphasizing Gibraltar’s role: “We are surrounded by markets where tobacco prices are lower, such as Gibraltar, Andorra, and Portugal.”

 

Non-domestic tobacco includes contraband and counterfeit products as well as legal purchases made abroad or in the Canary Islands, where taxes are lower than on the Spanish mainland and Balearic Islands. Ingelmo urged the Spanish government to adopt “rational” tax policies, warning that aggressive hikes risk pushing more consumers to buy packs from places like Gibraltar and ultimately cause tax revenue losses, which already reached 467 million euros in the first six months.

 

Gibraltar’s proximity and lower prices have made it a key player in this issue, with many Spanish smokers crossing the border to buy tobacco. This dynamic is echoed elsewhere in Europe, where countries like France and the Netherlands have seen similar impacts from high taxes, leading to increased illicit consumption and cross-border buying.

 

Since Spain’s initial price rises earlier this year and in July, the cost of many cigarette brands has increased, aiming to reduce smoking and raise revenue. However, these efforts also seem to have fuelled a significant boost in tobacco purchases from nearby cheaper markets.

 

As Spain navigates the challenges of tobacco taxation in 2025, it faces the complex task of balancing tax increases with the realities of a closely linked European market. Cross-border sales, especially involving nearby Gibraltar with its lower tobacco prices, highlight the need for a balanced approach. Such an approach must protect public health while also safeguarding government revenue, ensuring policies do not inadvertently drive consumers to illicit or foreign markets.

 

 

Image: Photo by Basil MK: