1. Bodrogi József Szeged, 17th of June 2011

2. Introduction This lecture is about smuggling but its goal is to assess the size of tobacco consumption in Hungary. Due to the Hungarian statistical law from 2005 the CSO may not publish production data.

3. Smuggling Has two main forms Large-scale organized smuggling of tobacco products (illegal tranportation, distribution or large consignments of tobacco Bootlegging: individual or small-group purchases of tobacco Causes huge damage in Europe Its size is cca. EUR 10 billion (greater than alcohol smuggling) approximates drug smuggling (legal consequences are less serious, same profitability, large smuggler group are involved) profit on one truckload of smuggled tobacco is about EUR 2 million in England (highest in Europe) BAT has signed ten-year agreement with EC to combat tobacco smuggling

4. Smuggling 30% of world export, 350 billion pieces, are smuggled Smuggling in a few countries Country% Cambodia35 Pakistan30 Brasil17 Austria15 Indonesia5 Sweden3 Source:Merriman et al. Cambridge, Mass National Bureau of Economic Research

5. Smuggling in Hungary YearSmuggled cigarette% 20001,688,4 20012,8814 20021,999 20031,659 20042,8218 20053,623 20062,8718 20071,9512 20081,5610 20091,419 20101,278

6. Smuggling in Hungary in 2000- 2010 Till 2004 smuggling grew considerably, since that time it has been decreasing: Hungary has become a transit country the efficiency of control has increased According to literature, smuggling will only bring profit if twice the confiscated amount can be sold in the market.

7. Main smuggling routes to Hungary

8. Green border River Tisza Hamburg Bootlegging: Záhony,1 million entrants/year (38 million pieces), Röszke, 1 million entrants/year (76 million pieces) 1% of total consumption* Estimated smuggling (2010) effecting the consumption 2.54+0.11=2.65 billion pieces - 18% *NAV estimation 2010

9. Consumption and excise tax 2000- 2010

10. Conclusions: Role of smuggling will grow in the next 18 months as a result of triple excise tax raises Tobacco excise tax accounts for 1/3 of overall excise tax revenue in Hungary. As we know, the state budget has no bottom...