“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.”

- ENDS -

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.

website.

“On the 1 January 2010 the Government imposed the largest tax increase on tobacco products in ten years and now, less than 3 months later, taxes are to rise again. We question why HM Treasury would impose a 7% increase in such a short period, when latest HM Revenue & Customs figures show that up to 24% of the cigarette market, and 63% of the handrolling market still avoids UK duty, costing the Treasury as much as £11 million per day in lost revenue (1). Today’s announcement will only provide further stimulus to those who seek to profit from the illicit trade in tobacco.

”The Irish Government recognised that tax increases were driving the illicit trade in tobacco and therefore chose not to raise duties at their Budget in December 2009. The Chancellor should have followed their example.”

The TMA’s concerns are supported by research from CEBR (2), which clearly shows that the Government decision will lead to an immediate increase in smuggling and associated criminality, threatening the viability of retailers and impacting on the economy as a whole. It will also undermine the positive work that the TMA and its member companies have undertaken with HMRC to combat the smuggling of both genuine and counterfeit tobacco products.

Mr Ogden added:

“In spite of this evidence, the Government are persisting with this ill-conceived tax measure, which will delight the smugglers.”

(1) HM Revenue & Customs Measuring Tax Gaps 2009 (March 2010 – Revised)
(2) Estimating the impact of a tax increase on the legal and illicit tobacco markets, Centre for Economics and Business Research ltd, October 2009

- ENDS -

For further information,interviews and a chart showing the relationship between Budgetary tax increases and non-UK duty paid consumption, please contact:

Zöe Walker, Corporate Affairs Manager                         Dirk Vennix, Director of Communications
t: 020 7544 0115 m: 07790 060041                               t: 020 7544 0111 m: 07872 376748
e: zwalker@the-tma.org.uk                                             e: dvennix@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. Prior to the Budget a typical pack of 20 cigarettes cost £6.13 in the UK against around £2.80 in Spain and less than £1.75 in Poland.

3. The UK has the second highest cigarette taxation in the European Union, behind the Republic of Ireland.

4. HMRC released revised figures in March 2010, which show that up to £4.0 billion in revenue was lost through smuggling and crossborder shopping in tobacco products in 2007/08.

5. Since 2000/1 HMRC estimate that up to £38 billion in revenue has been lost.

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

“The suggestion that tobacco tax be increased by 5% and the tobacco duty escalator be reintroduced is ridiculous.

” HMRC recognize that high tax exacerbates smuggling and it was only when the Government removed the tobacco duty escalator in 2001 that the situation began to stabilize. Since 2001, a policy of fiscal restraint, combined with greater enforcement has seen levels of non-UK duty paid (NUKDP) consumption gradually fall. However, the TMA estimates that up to 24% of the cigarette market and up to 62% of the handrolling market is still NUKDP, and within the NUKDP market there has been a noticeable increase in counterfeit product and the appearance of ‘cheap whites’*.

“The TMA believes that 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. Raising tobacco taxation above the rate of inflation is counter productive and will only increase smuggling. Evidence from the UK‘s recent history proves this point.

“When the essence of a report is based on statistics, it loses its credibility when the numbers fail to add up. The tax on a pack of cigarettes, equates to 23.3 pence per cigarette and according to the report each cigarette smoked costs the country 6.5 pence, it would seem smokers already contribute 350% more than the costs attributed to them in the report.

“This report follows Sir Liam Donaldson’s report, that puts the cost of Alcohol at £22.7bn, Obesity at £20bn, Inactivity at £10.1bn and Smoking at £7.9bn, clearly indicating a breadth of issues that need to be addressed through education. If taxation resolves public health issues, then one can ask the question whether Policy Exchange will recommend the introduction of inflationary taxes across a range of consumable products.”

* HM Revenue & Customs defines “Cheap Whites’ as brands produced by smaller, overseas manufacturers that make no legitimate supplies of any tobacco products to the UK. There is often little or no legitimate market for these brands anywhere in the world. Effectively, these products – commonly known as “Cheap Whites”– are produced for smugglers. In some cases “cheap whites” are produced in countries outside the European Union, such as Russia, and smuggled into the UK where they are illegally sold at a street price of between £2.50 – £3.00 per packet.

“Independent research[1]that was presented to the Treasury in October predicts that smuggling will increase by 15% and up to an additional £300 million in revenue will be lost to the illegal market as a result of this tax increase. In spite of this evidence, the Government have decided to allow this potentially disastrous tax hike.”

“When VAT was reduced in December 2008, tobacco and alcohol excise duties were increased to leave prices broadly unchanged. However, when VAT returns to 17.5% on New Year’s Day, there will not be a compensatory reduction in these excise duties. So this is not just a VAT increase, it is effectively a tax on a tax.

“As a result, the price of a pack of 20 cigarettes will rise by up to 18 pence, the largest single increase in ten years. We are extremely worried that this “stealth tax” will increase tobacco smuggling and organised crime, especially against a backdrop of rising unemployment and falling incomes, and the independent research supports this view.

Since 2001, a policy of gradual tax increases in line with inflation, combined with a positive working relationship between TMA member companies and enforcement agencies has seen consumption of products not paying UK taxes gradually fall. However, according to HM Revenue & Customs, up to 23% of the cigarette market and 61% of the hand rolling market are avoiding UK taxes, costing the Government up to £10 million per day in lost revenue.

Mr Ogden added:

“There is an alarming increase in new forms of smuggled product. Counterfeit cigarettes and “cheap whites”[2] have a typical street price of £2.50 per pack, less than half that of legitimate brands. We are worried that this latest “stealth tax” will enable criminals to increase their sales of cheap tobacco even more. In light of all the evidence we strongly urge the Chancellor to adopt the approach recently taken by the Irish Finance Minister[3] and freeze tobacco taxes rather than raise them even higher.”

[1] Estimating the impact of a tax increase on the legal and illicit tobacco markets, Centre for Economics and Business Research ltd, October 2009

[2] HMRC defines “cheap whites” as brands produced by smaller, overseas manufacturers that make no legitimate supplies of any tobacco products to the UK. There is often little or no legitimate market for these brands anywhere in the world. Effectively, these products – commonly known as “cheap whites”– are produced for smugglers.

[3] During his Budget speech on the 10 December 2009, the Irish Finance Minister Brian Lenihan stated: “I have decided not to make any changes to excise on tobacco in this Budget because I believe the high price is now giving rise to massive cigarette smuggling.”

- ENDS -

For further information and/or interviews please contact:

Dirk Vennix, Director of Communications t: 020 7544 0109 m: 07872 376748
e: dvennix@the-tma.org.uk or
Zoe Walker, Corporate Affairs Manager t: 020 7544 0115 m: 07790 060041
e: zwalker@the-tma.org.uk

Notes to Editors:

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)
HMRC figures released at last year’s PBR showed that in 2007/08 up to £3.7 billion in revenue was lost through smuggling and crossborder shopping in tobacco products and over the last ten years these losses exceed £45 billion.
The UK has the second highest cigarette taxation in the European Union, behind the Republic of Ireland. Despite a stronger exchange rate and a substantial excise increase in June 2009, cigarette retail prices in Spain are still less than half of those in the UK.
The Memoranda 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.
Further information can be found on the TMA’s website – www.the-tma.org.uk.
——————————————————————————–

“When VAT was temporarily reduced in December 2008, tobacco and alcohol excise duties were increased to compensate, leaving prices broadly unchanged. However, when VAT returns to 17.5%, there will not be a compensatory reduction in excise duty. Therefore, the raising of VAT from 1 January will have a unique impact on the tobacco and alcohol sectors. It will lead to increases of between 13-18 pence on a pack of cigarettes, representing the largest single tax increase since March 2000, when smuggling was at its peak. Not only will this increase be significantly above inflation, but it will also take place against a backdrop of rising unemployment and falling incomes, providing further incentives to criminals to illegally import and distribute cheap tobacco to adult smokers and potentially children.

“Our fears are supported by independent research , which clearly shows that the Government decision will lead to a significant increase in smuggling and associated criminality, threatening the viability of retailers and impacting on the economy as a whole. In spite of this evidence, which was presented to the Treasury in October, the Government are persisting with this ill-conceived tax measure.

Since 2001, a policy of fiscal restraint, combined with greater enforcement has seen levels of non-UK duty paid (NUKDP) consumption gradually fall. However, the TMA estimates that 24% of the cigarette market and 62% of the handrolling market is still NUKDP, and within the NUKDP market there has been a noticeable increase in counterfeit product and the appearance of ‘cheap whites’ .

The TMA believes that 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. Raising tobacco taxation above the rate of inflation is counter productive and will only increase smuggling. Evidence from the UK‘s recent history proves this point.

Mr Ogden added:

“We strongly recommend that the Government reverses this tax increase at the next Budget, otherwise the expected surge in illicit trade will undo all the hard work that the TMA’s member companies and enforcement agencies have undertaken in recent years in tackling the illicit trade in tobacco.”

- ENDS -

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. HMRC figures released at last year’s PBR showed that in 2006/07 up to £4.1 billion in revenue was lost through smuggling and crossborder shopping in tobacco products and over the last ten years these losses exceed £45 billion.

3. The UK has the second highest cigarette taxation in the European Union, behind the Republic of Ireland. Despite a stronger exchange rate and a substantial excise increase in June 2009, cigarette retail prices in Spain are still less than half of those in the UK.

4. 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.

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

“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.”
- ENDS -
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.

“The increase in tobacco tax announced today will do little to reduce the level of tobacco smuggling and crossborder shopping which lost the Treasury £4.5 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.”

HM Revenue & Customs’ (HMRC) latest estimates show that up to 18% of cigarette and 62% of handrolling tobacco consumption is smuggled and 70% of all large scale cigarette seizures are counterfeit. On top of this many other smokers choose to buy their tobacco products from elsewhere in the EU where taxes and therefore prices are considerably less.

Mr Ogden added:

“UK tobacco manufacturers 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.“

Through a comprehensive Memorandum of Understanding, and supporting legislation, the TMA and its member companies continue to work closely with HMRC to combat the smuggling of both genuine and counterfeit tobacco products.

An example of this co-operation, the incorporation of covert security features in the tobacco products manufactured by our member companies, was announced at last year’s Budget. This measure will help to ensure that counterfeit tobacco products are kept out of the legitimate retail network. We have supplied HMRC with the necessary equipment that will enable them to start enforcement action soon after this Budget.

While the growth in the level of smuggling has been halted 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.

- ENDS -

For further information please contact:

Ian Howell, Tax & Information Manager

t: 020 7544 0113 or e: ihowell@the-tma.org.uk

Notes to Editors:

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

2. HM Revenue & Customs estimates that in 2005/6 up to 18% of cigarette and up to 62% of handrolling tobacco consumption was smuggled. Crossborder shopping accounts for a further 8% of cigarette and up to 14% of handrolling tobacco consumption.

3. Prior to the Budget a typical pack of 20 cigarettes cost £5.55 in the UK against around £1.90 in Spain. A 50g pouch of handrolling tobacco cost £11.20 in the UK against around £3.75 in Belgium.

4. The TMA estimates that in 2007 around £4.5 billion in revenue was lost through smuggling and crossborder shopping in tobacco products and over the last ten years these losses exceed £40 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 TMA met with Angela Eagle MP, the Exchequer Secretary to the Treasury, on 21 February to outline the measures that would reduce the level of smuggling and crossborder shopping. These are:

•A freeze in the level of tobacco tax – as seen in previous years, any increase only serves to increase the incentives for those who smuggle and those who seek to purchase illicit tobacco.
•HMRC should make full use of existing laws to prosecute those who trade in illicit tobacco products.
•HMRC needs more resources and manpower for enforcement action.
•HM Government should seek to introduce a fixed rather than indicative level on the amount to tobacco products that travellers can bring into the UK from elsewhere in the EU.

“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.

“The inflation-only rise in tobacco taxes is not surprising given this approach has, over the
last four years, helped stabilise the level of smuggling and crossborder shopping.   However,
while we welcome the Chancellor’s restraint, it is still an increase, and as a result the gap
between UK tobacco prices and the rest of the EU will widen.

“Increasing the cost of cigarettes, already at £4.89 a pack, when the average price in the rest
of the EU is less than £2.00, does nothing to deter smugglers or reduce the incentive for smokers
to buy cheap cigarettes from abroad.

“The 28% of cigarettes and 73% of handrolling tobacco that evades UK duty represents a huge loss
of revenue for retailers and the UK Government. This increase will not solve the problem.”

- ends -

Notes to Editors

1.This press release is issued on behalf of the TMA’s principal member companies: Imperial
Tobacco Ltd, Gallaher Ltd and British American Tobacco.
2.Prior to the Budget the price for the most popular price category of cigarettes was £4.89.
Typical prices in Spain and Belgium are £1.45 and £2.59 a pack respectively.
3.The price of a 50g pouch of handrolling tobacco was £9.90. The price of the same brand of HRT
in Belgium is around £3.00.
4.TMA estimates that total non-UK duty paid consumption of cigarettes in 2004 was 28% (20
billion cigarettes), almost 60% sourced from other EU countries. 73% (7,950 tonnes) of
handrolling tobacco is non-UK duty paid, mostly sourced within the EU.
5.HM Customs & Excise have estimated that the loss of revenue to the Treasury from the smuggling
and crossborder shopping of tobacco products in 2003/4 was £4 billion. Total revenue lost since
1995 exceeds £23 billion.
6.In the lead up to this year’s Budget the TMA called for:

◦A tax freeze on cigarettes
◦A £4 tax reduction on 50g handrolling tobacco
◦An increase in HM Customs & Excise resources at airports, ports and inland
◦The enforcement of travellers’ allowances wherever possible – particularly against the ‘new’ EU
Member States.

ends

For further information, please contact:

Gill Silverman, Media and Information Manager
T: 020 7544 0108
M: 07712 530 436
F: 020 7544 0117
Email:  information@the-tma.org.uk

Notes to Editors

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

2. Tobacco consumption and the prevalence of smoking has remained ‘stable for more than a decade’ *, as many smokers, instead of cutting down or quitting in the face of higher tax‑induced prices in the UK, have gone abroad to buy their tobacco where it is significantly cheaper or turned to the black market.  (see Chart 1)

Chart 1: Handrolling Tobacco Prices Across the EU – January 2005

Source: TMA

3. Cigarette smuggling has been brought more under control due to significant additional resources for HM Customs & Excise and four years of tobacco duty increases pegged to inflation. However, 28% of cigarette and 73% of handrolling tobacco consumption in the UK is still avoiding UK duty. (See Table 1)

Table 1: Handrolling Tobacco Consumption in UK

Source: TMA

4. The TMA has calculated that if there were a cut in tax of £4 per 50g pouch of handrolling tobacco even if only half of non-UK duty paid consumption reverted to UK retailers, there would be no effect on Treasury revenues. If the entire non‑UK duty paid sector was converted back to UK retailers this would yield an additional £200 million.

Table 2: Revenue Losses from Smuggling and Crossborder Shopping

Source: HM Customs & Excise. Data shows revenue (excise duty & VAT) losses resulting from the smuggling and crossborder shopping of all tobacco products.

* Office for National Statistics. Cigarette Smoking: Stable for more than a decade. www.statistics.gov.uk/CCI/nugget.asp?ID=866&Pos=6&ColRank=1&Rank=160