THE CIGARETTE maker Gallaher warned yesterday that bootlegging of tobacco from mainland Europe, where taxes are much lower than in Britain, remains a "significant issue". The company said sales fell in the legitimate domestic cigarette market by just over 4 per cent during the first three months of this year, but chairman Peter Wilson told shareholders at the annual meeting he believed the market "may well be roughly flat" because "bootlegging". "The UK government needs to take the whole issue of smuggling more seriously - ultimately it is the small retailer who is being punished," said Wilson. Gallaher, the country's biggest tobacco company, owns the best selling cigarette brand Benson and Hedges as well as leading low tar brand Silk Cut. Britain has 12 million smokers, consuming about 77 billion cigarettes. Gallaher shares fell 0.75p to 309.25p.