Smuggling of cigarettes and other tobacco products, and related tobacco tax evasion, undermines public health, robs states of much-needed revenue, and provides a potential source of revenue for organized crime and terrorists.

Concerns about tobacco product smuggling and tax evasion have grown as more states look to tobacco tax increases as not only a useful revenue source, but also as a powerful tool for reducing tobacco use, particularly among children. Every single state that has increased its tobacco taxes significantly has enjoyed substantial increases in state revenue, while reducing tobacco use. But these benefits would be even larger except for the fact that hundreds of websites illegally sell tobacco products over the Internet without collecting applicable tobacco taxes (or verifying the age of purchasers), and numerous criminal organizations continue to smuggle contraband cigarettes into higher-tax states for illegal resale.

Worldwide, approximately one-quarter of all legally exported cigarettes end up smuggled across international borders – and extensive evidence indicates a significant amount of that international smuggling is condoned or abetted by the tobacco companies. Making matters even worse, tobacco product smuggling is sometimes used by terrorist organizations to help finance their operations (see GAO report on Terrorist Financing).

Unfortunately, federal and state laws to stop tobacco smugglers are, for the most part, outdated and do not provide law enforcement officials with the tools they need to prevent and reduce tobacco product smuggling and tax evasion.

Congress can update these laws and close the many loopholes by passing legislation that would strengthen existing laws relating to contraband cigarette trafficking and apply them to all tobacco products made or sold in the United States. As part of this effort, Congress needs to pass strong new laws to stop illegal Internet sellers from facilitating tobacco tax evasion and from serving as another new source of contraband tobacco products (see our special report on Internet Tobacco Sales).