EU wants neighbours to match tobacco duties to hit smuggling

(VILNIUS) - The EU will seek talks with Russia and other eastern neighbours on tobacco duties in an effort to fight smuggling, which cost the bloc 10 billion euros ($14.2 billion) a year, a top official said Thursday.

"One of the instruments is negotiations with countries on the other side of the border regarding the gradual moving of their excise policy closer to EU policy," Algirdas Semeta, the 27-nation EU's tax and customs chief, told reporters.

On a visit to his native Lithuania, an EU country bordering non-members Belarus and Russia, Semeta said differences in excise duties encourage smuggling.

Semeta later specified that Moldova and Ukraine have already "in principle agreed with the principle of drawing closer their excise duties".

"We have expressed the same to Russia, as well as Georgia, Armenia and other countries in the EU Eastern Partnership programme," he told AFP after the press conference.

Semeta said tobacco was the focus because its smuggling causes the biggest single tax-loss in the EU budget.

"EU losses amount to 10 billion euros every year because of smuggling and fake cigarette entering EU markets," Semeta said.

In a new plan to fight smuggling the bloc's executive boy, the European Commission, will also intensify joint operations on EU borders and urge EU member states to coordinate sanctions for traffickers, he said.

For smugglers, the trade makes business sense.

Costing the equivalent of around 50 euro cents a packet in Russia's Baltic territory of Kaliningrad, for example, contraband branded cigarettes sell for at least 1.50 euros in Lithuania and almost four in Germany.

Over-the-counter prices are around 2.50 euros in Lithuania and five in Germany.

Overall, a gang's return on investment is 375 percent, according to tobacco industry estimates.