LAST year tax authority Hacienda missed out on €1,279 million in duty on contraband tobacco, not to mention VAT.
High taxes on tobacco encourage smuggling, the tobacco companies claim, although Spanish experts disagree.
The economic crisis is responsible for first drop in tobacco revenue for 25 years as thousands turned to smuggling to make ends meet, they said.
A common entry points for contraband tobacco is Gibraltar, where a carton of cigarettes costs €25 compared to €42 in Spain.
There is 40 per cent unemployment in La Linea and residents bringing in the cheaper product can make a profit either by selling it themselves or working for others.
Until now, officials turned a blind but on March 2 dozens of people returning from Gibraltar could be seen remonstrating with customs officials.
Why could they not pass across unmolested with their cigarettes as usual, they wanted to know.
After heated exchanges, a high-ranking officer explained that as of March 1 they had strict instructions to allow only one carton per person to be brought over from Gibraltar each month.
A total 11,415,967 people crossed border between Spain and Gibraltar in 2009, rising to 12,481,614 in 2010 and 13,337,844 in 2011.
Smuggling has long been regarded as a Campo de Gibraltar tradition and the increase in border crossings has been specifically attributed to people engaged in bringing in tobacco.
The number of cars increased by around 500,000 and until this month’s crackdown, mopeds and motorcycles were sometimes crossing at the rate of 60 a minute.
Contraband tobacco had undergone a transformation since 2010, explained an Hacienda spokesman.
Fewer imitations of leading brands were intercepted in transit but the real thing was being brought in to sell at lower prices, with some smuggling rings employing up to 100 people.
Neither is only Hacienda losing out. Cigarette sales in Cadiz have dropped by up to 50 per cent, complained an association of the “estanqueros” licensed to sell tobacco.
“Only three “estancos” remain in La Linea where there were once nine,” revealed the association’s vicepresident, Jose Bermudez.