The Government risks undermining its own Tackling Tobacco Smuggling Strategy

Commenting on today’s Budget announcement, Christopher Ogden, Chief Executive of the Tobacco Manufacturers’ Association (TMA), said:

“Government has today increased tobacco duties by 2% above inflation which clearly demonstrates a complete lack of joined-up-thinking as taxation is the acknowledged driver of the illicit tobacco trade. The refreshed Tackling Tobacco Smuggling Strategy is to be announced shortly, yet this increase will only serve to undermine the effectiveness of this strategy.

”The Irish Government recognised that tax increases were driving the illicit trade in tobacco and decided not to raise duties in the last two Budgets. The Chancellor should have followed their example.”

According to latest data available from HM Revenue & Customs, up to 22% of cigarettes and 61% of handrolling tobacco consumed in 2008/09 avoided UK duty.This equates to a revenue loss to the Treasury of £3.8 billion (£10.4 million per day).

Mr Ogden added:

”As part of the Tackling Tobacco Smuggling review we are working closely with HMRC on a number of specific areas. This is an extremely positive development, but since January 2010 tobacco taxes in the UK have increased more than in any other EU Member State. With the further tax rise announced today, there is great concern that the cumulative effect of these tax increases will lead to an escalation in illicit trade.”

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For further information\interviews, please contact:

Zöe Walker, Corporate Affairs Manager
t: 020 7544 0111 m: 07872 376748
e: zwalker@the-tma.org.uk

Dirk Vennix, Director of Communications
t: 020 7544 0115 m: 07790 060041
e: dvennix@the-tma.org.uk

Notes to Editors:

1. The TMA is the trade association for tobacco companies that operate in the United Kingdom. Our members are British American Tobacco UK Ltd, Gallaher Ltd (a member of the JTI Group of companies) and Imperial Tobacco Ltd.

2. The Tackling Tobacco Smuggling strategy was unveiled in March 2000, with further revisions taking place in March 2006 and November 2008.

3. The Tobacco Manufacturers’ Association (TMA) participated in Progressive Vision’s summit on the illicit tobacco market, which took place in London on 31 January 2011. Mark Garnier MP, Treasury Select Committee member spoke at the event. An audience of government and law enforcement officials, retailers, manufacturers and other key stakeholders explored measures for a new and coordinated approach to tackling and raising awareness of tobacco smuggling. Further information on the event can be found on the TMA’s website.

4. Prior to the Budget a typical pack of 20 cigarettes costs £6.63 in the UK against around £3.15 in Spain and £2.25 in Poland. The UK has the second highest cigarette taxation in the European Union, behind the Republic of Ireland.

5. HM Revenue & Customs Measuring Tax Gaps Report 2010 revealed that up to £3.8 billion in revenue was lost through smuggling and crossborder shopping in tobacco products in 2008/09.

6. Since 2000/1 HMRC estimate that over £40 billion in revenue has been lost because of smuggling and crossborder shopping.

7. Further information can be found on the TMA’s website.

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