In advance of the Budget on 20th March 2013, tobacco firm JTI has called on the Chancellor to abandon the tobacco duty escalator.
In his Autumn Statement last December, the Chancellor announced that he was cancelling the last Government’s fuel duty escalator, and JTI believes that he should now do the to the tobacco duty escalator – a system the company says is an “equally counterproductive policy”.
To back up this claim, JTI quotes the Government’s own figures, which show that a one percentage point increase in the illicit trade equates to an additional revenue loss of around £130m.
In addition to this, up-to-date information shows that in 2012, 21% of cigarettes avoided UK rates of duty, up from 17% in 2011 Empty Pack Survey. HM Revenue & Customs latest estimates show that up to £3.4bn in revenue was lost in 2011/12 due to non-UK duty paid cigarette and hand-rolling tobacco consumption. Incredibly, over the last ten years the total revenue loss is estimated to be as much as £43bn.
Jorge da Motta, Managing Director of JTI UK, said: “We urge the Chancellor to abandon the program of the duty escalator for tobacco. The Government has already dropped the duty escalator on fuel it inherited from the previous Government, and the time is now right to detach tobacco from the escalator policy which has seen the level of non-UK duty paid cigarettes now exceed one in five.
“The total revenue lost as a result of the high tax on cigarettes and hand-rolling tobacco in the UK between 2001/2 and 2011/12 is a substantial £43bn, surely the Government can’t continue to leak money in this way only for it to end up in the pockets of organised criminal gangs.”
