Assessing Fiscal Risk: Hidden Structures of Illicit Tobacco Trade Across the European Union

Evgenia Anastasiou (), George Theodossiou, Andreas Koutoupis, Stella Manika and Konstantinos Karalidis
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Evgenia Anastasiou: Department of Business Administration, University of Thessaly, 41110 Larissa, Greece
George Theodossiou: Department of Business Administration, University of Thessaly, 41110 Larissa, Greece
Andreas Koutoupis: Department of Accounting and Finance, University of Thessaly, 41110 Larissa, Greece
Stella Manika: Department of Planning and Regional Development, University of Thessaly, 38334 Volos, Greece
Konstantinos Karalidis: Independent Researcher, 57001 Thessaloniki, Greece

JRFM, 2025, vol. 18, issue 11, 1-21

Abstract: This paper investigates the risk determinants and spatial patterns of tax revenue loss due to illicit tobacco consumption across the 27 EU Member States from 2017 to 2022. Using a panel dataset covering economic, demographic, social, political, and behavioral dimensions, we apply principal component analysis to identify key factors associated with revenue loss, and hierarchical clustering to group countries with similar risk profiles. Geographic Information Systems visualize the spatial heterogeneity of fiscal vulnerabilities. Findings reveal that institutional and economic stability, international trade and market share, socio-economic inequality and tax burdens, health and well-being, demographic aging and social dynamics, tobacco taxation policy, and labor dynamics and shadow consumption structure the patterns of tax loss risk. Findings also highlight significant differences among Member States, emphasizing the multidimensional nature of fiscal risks.

Keywords: excise tax; excise fraud; tax loss; risk; illicit trade; tobacco; shadow economy; principal component analysis; spatial patterns (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:18:y:2025:i:11:p:611-:d:1782994

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