Cheap Cigarettes Are Burning Greece's Finances

8 Φεβ 2016

On an unremarkable morning on Stournari street in downtown Athens, just a few blocks away from the epicenter of every riot the city has seen during its recent crisis years, two men of Asian origin politely and openly hawk cigarettes to passersby.

   The illegal packs of R.G.D.-branded smokes cost 1.50 euros ($1.70) each, less than half the price of 20 Marlboros or Prince at one of Greece’s ubiquitous street kiosks.
   As Prime Minister Alexis Tsipras walks another tightrope between creditor demands for additional belt tightening and a social backlash, the scene exposes an unhealthy truth: Greeks could smoke, drink and gamble their way out of their next financial hole, if only they were taxed on all of it.
   “Illicit cigarette and bulk tobacco trade strips the Greek state from significant revenue each year that could be used for paying pensions, salaries, and social benefits,” said Iakovos Kargarotos, vice-president of Philip Morris International’s affiliate in Greece, Papastratos AVES. “It creates a big public revenue hole that taxpayers have to fill.”
   More than 4 billion illegal cigarettes are being sold in Greece each year, according to the latest data from Papastratos. Based on the roughly 85 percent tax on a pack of 20, the duty alone would have brought 670 million euros of annual revenue. That’s more than the increase in employee contributions to pensions that triggered the latest wave of demonstrations and tear gas in Athens last week.
   The R.G.D. smokes appear to originate from China, but others come from Egypt and Pakistan, reaching Greece by sea on “ghost ships” and making the country a major hub for the illegal trade just as border patrols are overwhelmed by the flow of refugees from Syria.
   Some local tobacco farmers also sell bulk leaves, untaxed, directly to consumers, even openly over the Internet. It goes for 25 euros a kilogram, according to one advertisement.
   Greece has one of the highest rates of smoking in the world. It costs more than 3 billion euros a year in hospital treatment to lost working hours, Kostas Athanasakis, a researcher at Greece’s National School of Public Health, estimated.
   Take the local moonshine: about 24 million liters of untaxed tsipouro, a traditional spirit from grape marc, are being consumed every year in Greece, according to local distiller Kostas Tsililis. It results in an annual tax loss of at least 200 million euros.
   Greek law allows the production of it locally in uncontrolled steel vats, under 48-hour licensing, and the bulk sale of the popular spirit under a preferential tax rate. The fact that no bottling is required means that there’s way to keep track, Tsililis said.
   “It’s the only comestible product that’s legally sold without any control,” he said. “They prefer to cut grandma’s pension, rather than touch smugglers.”

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