Derek Allen, executive director of local authority group LACORS, said that the new partnership would give agencies a much better chance of tracing the supply of the product to its source and stopping it.
The illicit trade was "crippling the nation" and was particularly damaging to children and smokers from poorer backgrounds, added HM Revenue & Customs detection manager Keith Morgan.
He said: "This type of crime is depriving the public purse of about £3bn a year in lost revenue money needed to fund our public services. The effect on legitimate traders who have to compete on an uneven playing ground is devastating."
Tobacco Manufacturers Association director of communications Dirk Vennix said: "The illicit market is widespread and with up to 17% of the cigarette market accounted for by smuggled product, there are further concerns it could increase during the recession."