A new Oxford Economics report tracking tobacco markets across multiple countries has documented a stark shift: the illicit cigarette market more than doubled its share over the past decade, rising from 18% in 2015 to 43% in 2025 — an average increase of 25 percentage points.

The driver, according to the report: aggressive tax increases that widened the price gap between legal and illegal product.

Why this matters for nicotine pouches

The cigarette data is a warning label for the pouch category. As regulators worldwide move to tax nicotine pouches — often at rates comparable to or higher than cigarettes — the same economic incentive structure is being built.

Several markets are already testing the limits:

• Belgium imposed a €0.20-per-pouch excise tax in 2024, pushing retail prices above €6 per can in some cases
• Denmark has proposed tax rates that would make pouches more expensive per milligram of nicotine than cigarettes
• Canada is debating federal excise frameworks that could add $10+ CAD per tin

In each case, the legal-to-illicit price spread widens. A can of ZYN that retails for $7 legally can be sold for $3–4 through cross-border smuggling or counterfeit channels, with no age verification and no tax compliance.

What the cigarette precedent shows

The Oxford Economics findings align with a decade of evidence from cigarette enforcement:

• High-tax jurisdictions (UK, Australia, parts of Canada) now see 20–30% illicit market penetration
• Counterfeit operations have industrialized, with packaging quality that fools casual inspection
• Cross-border smuggling thrives wherever a tax border creates a €2+ per-pack arbitrage opportunity

For pouches, the risk is compounded by the category's legal ambiguity in many markets. A smuggled cigarette is clearly contraband; a pouch bought online from an unlicensed vendor in another EU country occupies a grey zone that enforcement agencies are still learning to police.

The policy trap

Governments face a narrow path: tax too lightly, and pouches are accused of being more accessible than cigarettes. Tax too heavily, and you create the conditions for an illicit market that's harder to control than the legal one.

The cigarette experience suggests the threshold is lower than regulators expect. Once illicit share crosses 15–20%, enforcement costs spike and the legal market begins to hollow out, reducing the tax revenue the policy was designed to generate.

For now, the nicotine pouch category remains overwhelmingly legal in most Western markets. But the Oxford Economics data is a 10-year case study in how quickly that can change when the tax math stops working for consumers.

SOURCES
Tobacco Reporter: Oxford Economics Report Links High Cigarette Taxes to Illicit Growth