Nearly 12% of the Spanish cigarette market comes from smuggled packs, and this trend is likely to continue until the illegal sales reach 20%. The rate is shooting up fastest in areas near the Spanish border, where it is likely to pass 30%. Four tax increases on cigarettes in four years and rampant unemployment have created ideal conditoins for an underground cigarette market.
Most of the unregulated packs are reaching mainland Spain via the Canary Islands and Gibraltar, a British territory. Gibraltar is the main entry point to Spain for underground cigarettes, and most tobacco merchants cannot compete with the low prices of Gibraltar black market dealers.
Higher tabacco taxes are typically embraced by the Spanish people. In fact, any finance minister knows that good arguments abound for hiking rates on cigarettes and other sumptuary goods. The problem comes when increases to so-called "sin taxes" are abused, as is happening now, which usually creates a black market and erodes the effect of the tax increases.
Not to mention the fact that mafias are attracted to illegal trade like this, becuase the public is not categorically against cigarettes even though trafficking them illegally is dangerous for the Spanish economy and the government's ability to raise revenues. Cristóbal Montoro's tax policy is causing an increase to black market tabacco sales, and at this point it will take more than empty gestures to do away with the illegal trade.
