Smokers use holidays to dodge soaring UK cigarette prices

Smokers use holidays to dodge soaring UK cigarette prices

PRESS RELEASE: Tobacco Manufacturers’ Association
9th August 2015

Smokers use holidays to dodge soaring UK cigarette prices
• Half of smokers plan to bring back “as many” cheap cigarettes as possible from holidays
• UK cigarettes up to sixteen times more expensive than other European countries
• UK tax on cigarettes has risen 40 per cent in last five years
• Treasury loses over £2.6 billion in revenue because of illicit and cross border sales
• Government urged by Tobacco Industry to review high tax policy

A major new survey of over 12,000 adult smokers released today reveals the true extent of how consumer behaviour has shifted to ‘non-shop sources’ to avoid paying the excessive taxation on tobacco products in the United Kingdom.

The poll, by Mitchla Marketing/Survey Sampling International, is one of the largest of its kind and received input from law enforcement officials and surveyed smokers nationwide.

It found almost one third (29 per cent) of smokers are now buying tobacco products from ‘non-shop sources’ due to the excessive costs in the UK.

The term ‘non-shop sources’ refers to purchases from abroad, online, from friends of family, in pubs, in the street, at car boot sales, in vans, at work and in ‘fag houses’ (private houses selling tobacco).

This surge in ‘non-shop’ sources has caused the Treasury to lose an estimated £2.1 billion of tax revenue every year because of the shift to non-UK duty paid products. A further £500 million is lost to cross border shopping each year. Collectively, this is the second largest loss to the Treasury after VAT avoidance and could have funded more than 110,000 additional police officers.

Over the past five years, taxes on tobacco products have risen 40 per cent and tax now account for 80 per cent of the price of a packet of cigarettes. This is the highest amount of taxation on tobacco in the whole of the EU.

The survey found that the primary reason smokers were buying non-UK duty paid products was due to the high prices in the UK – the highest of all 28 EU member states.

Giles Roca, Director General of the Tobacco Manufacturers’ Association, has called on the new cross departmental ministerial group set up to oversee a strategy to combat illicit tobacco to review the “failed policy of high taxation on tobacco products which has benefited no one other than criminals and terrorists who run the black market”.

UK smokers buying a premium brand of 20 cigarettes from a newsagents or other sources which sell tobacco products paying duty to the Treasury are charged over £9.

In comparison, nearly nine in ten (87 per cent) of those buying from ‘non-shop’ sources pay under £5.

In March 2014, the Government committed to a two per cent above inflation tax escalator on tobacco products, which means that a packet of 20 cigarettes will cost over £10 by the end of this Parliament.

It is this extortionate cost of cigarettes in the UK that has led to over half of smokers (51 per cent), around 5 million adults in the UK, saying that they plan to buy tobacco products from abroad and bring back as many as they legally can, although almost half (47 per cent) admitted they did not know the rules on how many they are legally allowed to bring back to the UK.

Almost one in five smokers (17 per cent) now regularly buys their tobacco from abroad to avoid paying UK duty and eight in ten (78 per cent) smokers said they had no objections to buying non-UK duty paid tobacco as long as it was from a legal source.

Eight in ten (80 per cent) of respondents suggested the reason they bought ‘non-shop’ products was related to the high cost of tobacco products in the UK.
Stock piling large amounts of tobacco bought on holiday was not an issue for 68 per cent of smokers. Despite smokers bringing back as many cigarettes as they legally can from their holiday, 60 per cent admitted they were nervous about buying from abroad in case the product was counterfeit.

The tobacco industry has launched an advertising campaign at airports to remind passengers jetting off on their summer holidays that bringing tobacco products into the UK and selling them on is a criminal offence. The campaign will run during the busy summer holiday get-away period between July and September.

The campaign ads have been strategically placed in the departure areas of airports and feature a young man being questioned by the authorities about illegal tobacco. The caption reads: ‘Planning to bring tobacco into the UK? Don’t sell it on, it’s illegal.’

The survey also revealed that counterfeit and illicit products are not just an issue overseas.
The poll revealed that nearly one in five (17 per cent) of roll your own tobacco smokers and more than one in ten (13 per cent) of cigarette smokers had bought illegal cigarettes in the UK.

The survey also highlighted a significant rise in the trend of buying online, which increased by 70 per cent in just one year.

When buying from a ‘non shop source’, smokers were found to buy large quantities, with a quarter (23 per cent) buying at least 200 cigarettes every time.

The sale of legal tobacco products in the UK contributes £12 billion every year through taxation. The amount raised from tobacco alone every year pays for the equivalent of the transport budget.

On average, three quarters of the cost of a packet of twenty cigarettes is tax, although on cheaper brands, tax can account for almost 90 per cent of the cost.

The cost of cigarettes in the UK is up to sixteen times more expensive than in other European countries. In Belgium smokers pay £4, in Spain £3.80 and in Moldova just 57 pence for a packet of 20 cigarettes.

In the last Parliament, tax on tobacco increased 40 per cent which resulted in high costs for tobacco products. These rising costs have led to an emergence of counterfeit illegal tobacco brands which are operated by criminal and terrorist networks.

One in five (18 per cent) of smokers polled said they had seen ‘Richman’, more than one in ten ‘Jin Ling’ (12 per cent) and ‘President’ (11 per cent). These illicit brands are completely unregulated and some have been found to contain industrial chemicals and asbestos.

Giles Roca, Director General of the Tobacco Manufacturers’ Association (TMA) said:

“This survey shows that excessive taxation on tobacco products is forcing up prices and driving consumers away from legitimate sources.

“This is clear proof that the government’s high tax tobacco policy is not working.

“As these figures show, it simply pushes up prices which pushes people to buy their tobacco from cheaper sources, including the black market.

“This aids organised criminals whilst losing the Treasury billions in potential revenue each year.”

“The Government must review its high tobacco tax policy as a matter of urgency.”

ENDS

For more information please contact Paul Stockall on 07545 440 700 or 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. (www.imperial-tobacco.com)

2. The survey was carried out online by Mitchla Marketing/Survey Sampling International between the dates of 18th May and 29th June

3. There are around 10 million adults who regularly smoke in the UK

4. UK tax (excise + VAT) revenues from cigarettes and hand rolling tobacco were an estimated £12.3 billion in 2014. According to HM Revenue & Customs Measuring Tax Gaps Report 2014, the illicit tobacco market cost the UK economy £2.1bn in lost tax revenue in 2013/14. A further £500 million was lost through cross-border shopping.

5. The new ministerial cross departmental group was announced in the March 2015 Budget to oversee a strategy to combat illicit tobacco. It will be chaired by the Exchequer Secretary commencing work in the autumn.

6. UK tobacco taxes increased by 40% over the course of the last Parliament

7. The price of a premium pack of 20 cigarettes costs £9.16 in the UK, 2 or 3 times higher than some EU member states.

8. HMRC guidelines for duty free allowances are,
• within the EU: Cigarettes 800; Cigars 200; Cigarillos 400; Hand rolling tobacco 1kg
• outside the EU: Cigarettes 200; Cigars 50; Cigarillos 100; Hand rolling tobacco 250g

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

To access a comprehensive summary of the Anti-Illicit Trade poll click here.

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