Cigarette, alcohol and fuel smuggling at an unacceptable level, say MPs

[FaGal]

Cigarette, alcohol and fuel smuggling at an unacceptable level, say MPs
news.ft.com - By Chris Giles, Economics Editor - March 15, 2005


Cigarette, alcohol and fuel smuggling cost the Exchequer £3.8bn a year in 2003-04 and "remain[s] at an unacceptable level", according to a parliamentary report published today.

The Treasury select committee urged the government to address the problems of smuggling tobacco for hand-rolling and the growth of the counterfeit cigarette market.

The committee praised the useful progress that had been made but indicated that progress had slowed since 2002. Excise duty fraud peaked in 2000-01, when cigarette-related evasion cost the taxpayer £2.8bn. Customs &Excise estimated that 21 per cent of the cigarette market in that year was illicit.

By 2003-04, although the estimated losses had fallen to £1.9bn, with an illicit market share of 15 per cent, the report said there was "still a long way to go". Progress stalled in 2003-04.

While the market share of smuggled cigarettes fell after 2000-01, their legitimate cross-border shopping market grew from 6 per cent to 9 per cent in 2003-04, further contributing to depressed revenues. The new threat, according to the select committee, came from counterfeit cigarettes, which accounted for 2bn of the 74bn consumed in 2003.

Most of the counterfeits originate in China, but the committee found there was only one UK Customs officer based in Hong Kong. Until the parliamentarians arrived on a visit, there had been no meetings between UK Customs and the Chinese State Tobacco Monopoly Administration.

"We recommend that Customs review the resources they are devoting to intelligence gathering . . . and consider placing officers within China," the report said.

Smuggling hand-rolling tobacco was "extraordinarily high" it said, adding "the fact that only three out of 10 packets of hand-rolling tobacco consumed in the UK are duty paid is a matter of very serious concern".

The committee said the size of alcohol fraud was much smaller but it supported the government's ambition to include a tax stamp on spirits bottles.