TMA comments on Government strategy to crackdown on illicit tobacco

The TMA welcomes the publication today by HM Revenue & Customs (HMRC) and the UK Border Agency (UKBA) of its revised strategy to combat the illicit tobacco trade.

Since the Tackling Tobacco Smuggling (TTS) strategy was introduced in 2000 the level of tobacco smuggling has been reduced but it still poses a significant threat. According to latest available figures from HMRC, smuggling continues to account for up to 17% of cigarette and 59% of handrolling tobacco consumption, resulting in a loss of up to £3.1 billion to HM Treasury.

Christopher Ogden, Chief Executive of the Tobacco Manufacturers’ Association (TMA), said:

“We very much welcome the Government’s commitment to cracking down on those who operate in the illicit tobacco market and we are pleased that the refreshed strategy acknowledges the importance of working with the TMA and its member companies.

“As part of the review we have been working with HMRC to look at ways to better understand the composition of the illicit tobacco market, the impact of taxation on consumption, intelligence sharing, communications campaigns and behavioural insight. Therefore, we welcome today’s report as it recognises our ongoing commitment and strong working relationship in this area.

”However, January’s increase in VAT and the subsequent tax hike at the Budget, has led to cigarette prices increasing by as much as 66 pence for a pack of 20 (87 pence on a 25gr of handrolling) and this will only incentivise smokers to seek cheaper illicit products and provide a greater profit motive for organised criminals to smuggle.

“The illicit tobacco market will continue to provide significant challenges but we look forward to a stronger working relationship with Government and law enforcement agencies in addressing this problem.”

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For further information\interviews, please contact:

Paul Stockall, Tax & Information Manager
t: 020 7544 0113 m: 07545 440700
e: pstockall@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. The Memorandum of Understanding (MoU) signed in March 2006 between the TMA’s member companies and HM Revenue & Customs create 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.

To supplement the MoU, key elements of the agreement have been enshrined in legislation (The Tobacco Products Duty Act 1979, as amended by the Finance Act 2006) so that any tobacco company, operating anywhere in the world, is under the same obligations as the TMA’s member companies to ensure that it does not allow its products to be smuggled.

The refreshed Tackling Tobacco Smuggling Strategy provides for agreement in principle to an update of the MoUs which will be announced in due course

3. A typical pack of 20 cigarettes costs £6.95 in the UK against around £3.15 in Spain and £2.25 in Poland.

4. 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.