Tax Increase is Lost Opportunity to Curb Tobacco Smuggling

Commenting on the Chancellor´s decision to increase excise duty on tobacco by the rate of inflation Tim Lord, chief executive of the Tobacco Manufacturers´ Association, said:

“An inflation-only rise in duty is not surprising given that the same approach in the last three years has helped stabilise smuggling and Treasury revenue losses. But, while we welcome the Chancellor’s relative restraint, an increase is still an increase, which means the gap between UK cigarette prices and the rest of Europe gets even bigger.

“Putting 8p on a £4.65 pack of cigarettes, when the average price elsewhere in Europe is only £2.35, does nothing to deter smugglers or reduce the incentive for smokers to buy cheap cigarettes from abroad.

“Since the decision was made to increase personal allowances from 800 to 3,200 cigarettes the level of legitimate crossborder shopping has increased dramatically. This 8p increase will only act as an added incentive.
This will be particularly noticeable after 1 May when cheap cigarettes will be available from ten more Member States.

“So this was a lost opportunity to reduce the amount of cigarettes and tobacco that escapes UK duty, legitimately or otherwise. Far from boosting Treasury revenues, the duty increase is likely to lose the Chancellor yet another £4.4 billion or more in the coming year on top of the £19 billion lost since 1996.

“This is not likely to dent the level of smuggling which is far too high already at 18%.”