Brexit

Overview

 

The UK tobacco industry would like the Government to negotiate an exit from the EU that includes the following outcomes:

  • Easy, non-bureaucratic access to skilled labour from the remaining EU Member States, and arrangements similar to those in place at present for skilled labour from elsewhere in the world;
  • Tariff-free importation of tobacco products from the remaining EU Member States;
  • Tougher controls on personal tobacco imports, including a transitional regime of reduced Minimum Indicative Limits (MILs) from high risk, low tax Member States prior to the UK’s exit, and hard limits on personal tobacco imports from all remaining EU Member States after Brexit;
  • A review of a number of provisions contained within the EU’s revised Tobacco Products Directive (TPD), including the requirement for minimum pack sizes and new e-cigarette restrictions.

 

Access to Skilled Labour

In common with other international businesses present in the UK, the tobacco industry would like the UK Government to continue to allow businesses to have easy, non-bureaucratic access to highly skilled individuals from across the EU, and, to avoid further complicating the process of recruiting talent into the UK, from outside the EU where necessary.

 

Trade

As part of the forthcoming trade negotiations between the UK and the EU, tobacco import tariffs should be resisted. The two primary objectives for the introduction of trade tariffs are the protection of a domestic market and the raising of revenues for the Government.  Neither of these is relevant to tobacco products.  The UK has no domestic agricultural tobacco production and the full closure of the UK’s domestic tobacco manufacturing facilities is already planned.  Moreover, the UK Government already raises billions of pounds in revenue from the direct taxation of tobacco products.  The introduction of tariff barriers between the UK and the remaining EU member states would only serve to complicate the current tobacco excise regime.

 

Personal Tobacco Imports

Minimum Indicative Limits (MILs) are an important non-tariff barrier to the inter-EU trade in tobacco products in the UK.  These suggested limits govern the amount of tobacco products that an individual can bring into the UK from another Member State for personal consumption without falling under suspicion of supplying the illegal tobacco market, which cost the Exchequer £2.4 billion in lost tax revenue in 2015/16.[1]

Following the vote to leave the EU, there is an opportunity to reform these rules to reduce the level of non-UK duty paid tobacco in the UK.  In particular, hard, reduced limits (perhaps 200 cigarettes per traveller, the same as international Duty Free retail) could be put in place immediately for individuals bringing tobacco products into the UK from countries that do not meet the minimum criteria outlined in the EU’s Tobacco Tax Directive.  This is permissible under existing EU law and a number of Member States, including Germany and Austria, have already introduced these hard limits.  In the wake of Brexit, these hard, reduced limits could be extended to cover all EU Member States.[1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/561322/HMRC-tobacco-tax-gap-estimates-2016.pdf

 

Review of the Tobacco Products Directive

Regulatory harmonisation of tobacco products across the EU has largely been driven by the Tobacco Products Directive (TPD), which was recently revised.  The TPD made significant changes to labelling requirements throughout the trading block, it requires all EU Member States to ensure that graphic health warnings with photos, text and cessation information will cover 65% of the front and the back of all cigarette and hand rolling tobacco packs by May 2017. The TPD also bans cigarette packs of less than 20 and hand rolling pouches of less than 30gr. Research undertaken by Oxford Economics suggests that the ban on smaller packs could result in losses to the retail sector of up to £1.5 billion pounds in foregone profits in the first year after full implementation.  The authors also concluded that the introduction of minimum pack sizes could cost the Government up to £2.1 billion in lost tobacco tax revenue in the first year after full implementation, of which much of this will be the result of illicit activity.[1] It is clear that the UK’s exit from the EU offers an opportunity for the Government to reconsider the EU-driven prohibition on smaller cigarette and hand rolling tobacco pack sizes in order to keep UK consumers in the legal market.

 

The TMA has provided written submissions on Brexit which are available to view here

 

 

[1] The Impact Of Minimum Tobacco Pack Sizes On Incidental Retail Spend And Tax Receipts

 

 

 

 

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