24 Mar Double tobacco tax hike will delight the smugglers
Commenting on the Chancellor’s decision to raise tobacco taxation for the second time this year, Christopher Ogden, Chief Executive of the Tobacco Manufacturers’ Association (TMA), said:
“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
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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 – localhost/tma.