Tobacco Industry’s Concern Over Tobacco Duty Increase

Commenting on the Chancellor’s decision to increase tobacco taxes in today’s Budget, Christopher Ogden, Director of the Tobacco Manufacturers’ Association (TMA), said:

“Today’s announcement of an inflation-only increase in tobacco duty is an indication that the Government acknowledges that tobacco duty is the cause of the UK’s high levels of smuggling and crossborder shopping.“

Since ending the policy of the tobacco duty ‘escalator’ in 2001 and increasing tobacco duty only in line with inflation in subsequent Budgets, the growth in the level of non-UK duty paid consumption has now been stabilised, even though it remains at a high level.

Mr Ogden went on to say:
“We welcome this continued restraint but it is still an increase. It will serve only to widen the price differentials between the UK and the rest of the EU. It will further encourage smuggling and counterfeit activity and enhance the economic incentive for smokers to shop abroad or purchase tobacco products on the black market.

“UK tobacco manufacturers are totally opposed to tobacco smuggling which undermines the legitimate market in this country. They work closely with HM Revenue & Customs to combat the smuggling of both genuine and counterfeit product.

“However, we maintain that a fundamental review of the UK’s tobacco tax policy, which is the root cause of the problem, must be undertaken.”

Ends
For further information please contact:

Gill Silverman, Media and Information Manager
t: 020 7544 0108
m: 07712 530 436
f: 020 7544 0117
e: gsilverman@the-tma.org.uk

Notes to Editors

1. This press release is issued on behalf of the TMA’s principal member companies: British American Tobacco, Gallaher Ltd and Imperial Tobacco Ltd.

2. Taxes on tobacco products in the UK are the highest in the European Union. Prior to the Budget the price for the most popular price category of cigarettes was £5.33. In Spain it was around £1.60 and it is as low as £0.42 in Latvia.

A full comparison of cigarette prices and tax levels across the EU at the start of the 2007 can be found on the TMA’s website – http://www.the-tma.org.uk/page.aspx?page_id=43

3. The tobacco duty escalator ran between the Budgets of December 1993 and March 2000, increasing the tax burden on a typical pack of cigarettes by 173 per cent. Over this period the level of non-UK duty paid cigarette consumption rose from 4 per cent to 31 per cent.

4. HM Revenue & Customs estimate that as much as £25 billion in revenue has been lost since 2000/1 due to smuggling and crossborder shopping.

5. The TMA estimates that 27 per cent of cigarettes and around 70 per cent of handrolling tobacco consumed in the UK in 2006 was non-UK duty paid.