Moves that would stop cigarettes being sold on the black market by terrorist groups and criminal gangs are in jeopardy following intense lobbying by the tobacco industry.

The European parliament will this week hold a crucial vote on the European tobacco directive that would compel EU member states to introduce an independent “track and trace” system for cigarettes, as well as imposing larger health warnings on packs and a ban on thin cigarettes, popular with young women.

Customs agencies, including HMRC, are alarmed that billions of cigarettes a year are being sold by tobacco companies to third parties who then sell them to other distributors, who ship them from high tax to low tax areas and even into countries in breach of international sanctions.

The complicated distribution network makes tracking cigarettes extremely difficult. As a result, the agencies see a new, independent track and trace system, which would give each pack of cigarettes its own unique identity stored on a government controlled database, as crucial.

The Observer reported two years ago that a dossier compiled by tobacco giant JTI’s then head of brand integrity, who was later fired after reporting his findings, alleged that its distributors were smuggling cigarettes across more than a dozen countries to avoid tax. Much of the product, it was suspected, went to Iran. There were also claims that JTI product was being smuggled from Russia into the more heavily taxed EU. JTI strenuously denied any wrongdoing and all the cigarette companies are adamant they do not connive with the distributors to bypass tax regimes.

But plans to introduce an independent tracking system have met with ferocious lobbying by the tobacco giants who want to use their own alternative, called Codentify, which has been strongly criticised by the All Party Parliamentary Group on Smoking and Health. The four tobacco giants have, unusually, come together to press the case for their own system which is supported by Interpol, the international policing organisation that has received more than 15m from the tobacco giant Philip Morris International.

A document leaked to the Observer, outlining the German position on the “track and trace” component of the directive, suggests its officials are preparing to endorse the tobacco industry’s proposals to retain its own tracking system. The tobacco lobby is strong in Germany where several of the political parties are well funded by the industry, a significant employer in the country.

Anti smoking groups fear continuing with the status quo means cheap cigarettes will continue to be smuggled across borders depriving national exchequers from legitimate revenue and allowing tobacco to fall into the hands of terrorists and organised criminal gangs.

“If the European parliament doesn’t get a final version of the tobacco directive agreed before the European elections next spring, then to all intents and purposes the tobacco industry will have won and the revised directive will be dead in the water,” said Deborah Arnott, chief executive of health charity ASH.

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