EU to sue tobacco giants for fraud

Europe opened a new front in the war against US tobacco giants yesterday, promising a law suit to recover the billions of dollars of revenues lost through cigarette smuggling.

Europe opened a new front in the war against US tobacco giants yesterday, promising a law suit to recover the billions of dollars of revenues lost through cigarette smuggling.

The decision, a big escalation in action against the manufacturers, follows new evidence which Brussels believes will prove tobacco firms are colluding in massive fraud. About 60 billion cigarettes are smuggled into Europe each year, costing EU countries billions of euros worth of lost revenue. Britain alone is estimated to lose out annually to the tune of £2.5bn, say Customs and Excise.

In the biggest cases, the smuggling happens as the tobacco is in transit from its place of production to its point of sale. Big ports such as Antwerp in Belgium benefit from a temporary suspension of customs duties, excise and VAT, so cigarettes can be bought at a fraction of their market price, moved on and re-imported into the EU at a huge profit.

Authorities had been unable to prove manufacturers were playing any role in a convoluted system in which tobacco is often routed via the Balkans. But, after a discussion yesterday the 20 European commissioners agreed on a civil case for damages in the US.

"This concerns the alleged implication of these companies in cigarette smuggling into the European Union," it said. "The aim is to achieve a degree of compensation for the alleged loss of revenues." No companies were named.

Luk Joossens, a spokesman for the Belgian Coalition against Tobacco, said the civil action was "crucial to combat smuggling at a global level" .

Campaigners say the tobacco industry has long had an interest in the illicit trade, with 10 to 25 per cent of some markets made up of smuggled goods. Tobacco giants have always denied collusion over smuggling.