Tobacco Tax Hike – Good News For Smugglers

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

“The increase in tobacco tax announced today will do nothing to reduce the level of tobacco smuggling and crossborder shopping which lost the Treasury more than £4 billion in revenue last year. The decision helps to maintain the UK’s position as one of the world’s most profitable destinations for tobacco smugglers and this is of great concern to the TMA and its member companies.

“The TMA and its member companies are totally opposed to the illegal trade in tobacco products, which undermines the government’s health policy, deprives the treasury of revenue, weakens legitimate retailers’ businesses and makes it easier for those under the legal age of purchase to obtain tobacco on the black market.“

While the growth in the level of smuggling has been curbed in recent years, HMRC still need to be provided with increased resources to tackle the problem.  However, the TMA believes the high level of tobacco tax, the root cause of the high level of tobacco smuggling, needs to be addressed and a fundamental review of fiscal policy must be undertaken.

Mr Ogden added:
“In order to reduce the level of smuggling and crossborder shopping, we have called on the government to take the following measures:

•         Reduce the level of tobacco tax to accelerate the decline in smuggling and crossborder shopping.
•         Provide extra resources for enforcement agencies to allow them to make full use of existing laws to prosecute those who trade in illicit tobacco products.
•         Apply a fixed rather than indicative level on the amount of tobacco products that travellers can bring into the UK from elsewhere in the EU. This will give clarity for both consumers and UK Border Agency officers.”
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For further information and/or interviews please contact:
Zöe Walker, Corporate Affairs Manager
t: 020 7544 0115  m: 07790 060041 e: zwalker@the-tma.org.uk

Notes to Editors:
1.         The TMA is the trade association for tobacco companies that operate in the UK. Our members are British American Tobacco UK Ltd (www.bat.com), Gallaher Ltd (a member of the JTI Group of companies – www.jti.com), and Imperial Tobacco Ltd. (UK). (www.imperial-tobacco.com)

2.         HM Revenue & Customs estimates that in 2006/7 up to 17% of cigarette and up to 59% of handrolling tobacco consumption was smuggled. Crossborder shopping accounts for a further 8% of cigarette consumption and 8% of handrolling tobacco consumption.

3.         Despite the current weakness of Sterling, prior to the Budget a typical pack of 20 cigarettes cost £5.78 in the UK against around £2.40 in Spain. A 50g pouch of handrolling tobacco cost £11.63 in the UK against around £4.75 in Belgium.

4.         The TMA estimates that in 2007 around £4.2 billion in revenue was lost through smuggling and crossborder shopping in tobacco products and over the last ten years these losses exceed £45 billion.

5.         The Memorandum of Understanding (MoU) between the TMA’s member companies and HMRC creates a comprehensive framework for co-operation aimed at combating the smuggling of both genuine and counterfeit tobacco products into the UK as well as seeking to deter all aspects of the illicit trade in tobacco products. Under the MoU there is an undertaking that both industry and HMRC will work together to identify and assess technologies that could be of benefit in tackling the trade in illicit tobacco products – the introduction of covert anti-counterfeit technology is a prime example of the benefit of the MoU approach in identifying particular concerns and quickly arriving at effective solutions.

6.         The formation of the UK Border Agency and also the reassessment of HMRC’s inland enforcement activities will, we hope, make a significant impact on illicit trade. It will take time for the new structures of UKBA / HMRC to get fully established but we believe that the requirements for more resources must be kept under review.

7.         Further information can be found on the TMA’s website – www.the-tma.org.uk.