Gibraltar
The imminent implementation of the European Union–United Kingdom agreement on Gibraltar, set to take effect in April 2026, has sparked significant concern among tobacconists in Andalusia, particularly in the province of Cádiz. The agreement entails the removal of the physical border between Gibraltar and Spain, introducing a new customs and fiscal regime for Gibraltar. This regime includes lower taxes on tobacco products compared to Spain, potentially leading to a substantial increase in smuggling activities and adversely affecting the local tobacco sector.
Under the new agreement, Gibraltar will apply an indirect tax equivalent to VAT, starting at 15% upon the treaty's entry into force and completing convergence within three years. Additionally, special taxes on tobacco will be set at the minimums established by the 2011 EU directive, which are significantly lower than Spain's current rates. In Spain, the minimum tax is €167.2 per 1,000 cigarettes, whereas in Gibraltar, it will be €115. This disparity is expected to make tobacco products considerably cheaper in Gibraltar, potentially leading to increased smuggling into Spain.
Salvador Vera, president of the tobacconists in Cádiz, has expressed that opening the border without harmonized taxation will result in a "brutal increase in illicit trade," potentially leading to the closure of over 100 tobacconists, job losses, and a reduction in annual tax revenue exceeding €100 million. Historically, tobacco from Gibraltar has accounted for up to 40% of the illicit market in Andalusia, and there is a growing fear of a return to such figures.
Local authorities and sector organizations are calling for urgent adjustments to the agreement to prevent the reopening of the border from becoming a gateway for smuggling. They emphasize the need for mechanisms to harmonize taxation and strengthen controls to protect the legal tobacco market and prevent the resurgence of established illegal networks in the region.
While the agreement aims to facilitate mobility and cooperation between Gibraltar and Spain, it is crucial to address these concerns to ensure that the economic benefits do not come at the expense of local businesses and tax revenues. The situation underscores the importance of balancing the facilitation of cross-border movement with the need to maintain fair competition and prevent illegal activities.
