The number of smuggled cigarettes seized by customs in Hong Kong shot up by 41 per cent last year from 2012.
The Customs and Excise Department said yesterday that more than 38 million illicit cigarettes were seized in the year to November - 11 million more than the total for 2012.
But a concern group says the trade is increasing, and the figures do not reflect its true size.
"They say there's a 41 per cent increase but these are just figures on successful seizures; you don't see how big the whole trade is," said Luisa Tam Han-may, executive director of United Against Illicit Tobacco. "The trade has grown - absolutely."
One in every three cigarettes smoked in Hong Kong in 2012 was illicit - the second highest proportion of 11 Asian countries - Tam said, citing a British study.
That would amount to 1.8 billion illegal cigarettes, which would have cost the government HK$3.3 billion in lost tax revenue.
In a bust last month some 3.95 million smuggled cigarettes - worth HK$10 million and with potential duties of HK$6.7 million - were seized by customs.
That brought the total number of confiscated illicit cigarettes last year to nearly 42 million.
Five storage and distribution locations were also discovered - in Tuen Mun, Choi Hung and Causeway Bay.
The cigarettes were found hidden in cubicles built behind false walls in cargo containers.
Seven people were arrested - two male drivers, two other men and three women.
"Illicit cigarettes have always been an issue in Hong Kong," Mak Hoi-wan of the department's revenue and general investigation bureau. "But we believe operations targeting border controls are an effective way to deal with the problem.
"We will continue to clamp down on illicit cigarette smuggling activities to safeguard the government's tax revenue."
Tam said the government needed to control the illegal trade rather than raise tobacco tax, or people would have more incentive to buy smuggled cigarettes and the trade would continue to thrive.
"I am not against high taxes, but the illicit trade is not under control. If you raise taxes for the anti-smoking campaign … it's basically solving one problem by creating a new one," she said. "It is dangerous and irresponsible."
She said more government departments should get involved to bring an end to the illegal trade. "The illicit cigarette trade involves a lot of money, transport, individuals and the triads. There needs to be [multi-departmental] co-operation to deal with it."
Smokers who have bought illicit cigarettes said they paid about HK$200 to HK$300 for 10 packets. That compares with about HK$50 for a single packet bought over the counter.
A study conducted by Cancer Research UK proposing tobacco taxes be trebled globally claimed the move would reduce the number of smokers by a third and prevent 200 million premature deaths worldwide.