The strengthening of control and the increase in excise taxes on tobacco products in Latvia have had the opposite effect: volumes of legal sales are declining, while the smuggling segment is rapidly expanding, depriving the state budget of millions of euros.
Board member of the Association of Traditional and Smokeless Tobacco Products, former Minister of Communications (2013–2015) Anrijs Matiss, spoke about the serious problems faced by the tobacco market in Latvia during the broadcast of "Preses klubs" on TV24.
According to him, official statistics from last year show a noticeable decline in sales across several categories. "In certain categories, such as electronic cigarettes, the sales volume has dropped by half. Nicotine products have also decreased by half. In other categories, there is a decline as well. For example, cigarette consumption has decreased by 10%," Matiss noted.
However, he emphasizes that this does not mean that Latvians have stopped smoking en masse. "No, that's not the case. We see that all of this has gone to the illegal market, into an uncontrolled environment," the expert stated. According to Matiss, the state budget has already felt the consequences.
"Taxes are not being paid. The state budget is down several tens of millions, sixteen, if I'm not mistaken, less revenue from these products compared to last year. One could say the goal has been achieved," he said ironically.
The expert believes that strict regulation and significant tax increases have effectively pushed legal trade into the shadows. "Legal trade has been transferred to an illegal environment, which no one can control at all. Last year, over 23% — that's one in four cigarettes smoked — were illegally imported or produced here in Latvia," Matiss reported. According to him, tightening import regulations only stimulates underground production within the country. "The harder it is to import, the easier it is to produce here, on the spot. That's for sure," he noted.
In Matiss's opinion, the current policy leads to a double negative effect: the budget loses revenue, and quality control over products weakens. "The state budget is missing out on revenue, and from a health perspective, it becomes more difficult to control the situation," he pointed out. Furthermore, the shadow tobacco market is becoming an attractive area for organized crime. "This is a very profitable illegal industry for various organized crime groups and other structures," the expert warned.
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