An assessment of cross-border tobacco purchases and associated tax losses in France

Smoking is a major public health problem, causing many preventable diseases worldwide. In recent decades, increasing the price of tobacco has become the main strategy used by governments to reduce smoking. However, price differences between certain neighbouring countries are likely to limit the effectiveness of this measure by allowing some consumers to buy tobacco at a lower price in a neighbouring country. Although the problem of cross-border shopping is not new, the extent of the phenomenon remains poorly understood and is still the subject of regular debate. This study contributes to its assessment in France by exploiting an unprecedented natural experiment : the closure of land borders between March 2020 and June 2020 as part of the fight against the Covid-19 pandemic. Our results show that the closure of the borders led to a 9.5 % surplus in tobacco purchases in mainland France compared to the counterfactual situation in which the borders had remained open. This result probably underestimates cross-border purchases. In fact, some tobacco consumption abroad may have continued during the first lockdown, as the borders were not completely closed, in particular for cross-border workers. Extrapolating the consumption observed in the rest of the country to border regions with identical characteristics, the revenue generated in France would be about 13.5 % higher if there were no cheaper alternatives abroad.