As the impact of counterfeit, illicit and non UK duty paid tobacco continues to have a major impact on local retailers throughout the country, JTI has documented the current state of this damaging market, and it doesn’t make for pleasant reading.
by Kevin Scott
The Government has a dilemma on its hands with the tobacco industry. All must be done to reduce the impact smoking has on the nation’s health and so the most obvious deterrent is used as a weapon – price. The trouble is, the more expensive tobacco becomes, the more likely a smoker is to consider buying their cigarettes or rolling tobacco from someone down the local market or in the pub on a Friday night. Last year alone an estimated £2.9bn was lost in tax revenue from illegal tobacco products. That’s £33m a day – not a slight sum in light of the current economic situation.
With a total of £12.1bn raised in taxes last year from tobacco and up to 90% of the total cost of some products being taxed, JTI argues in the report that it is “not an effective [way to reduce smoking] and results in many smokers avoiding paying tax altogether.”
When they don’t pay tax on the product, they don’t pay the retailer for the service they’re providing either. So while you might not think Government losses are your concern, for every sale they lose out on, you lose too.
There has been a 74% increase in tax on premium cigarettes since 2000 – with up to £5.83 being paid now per 20-pack. Of course there are legal ways of not paying tax. Go on holiday, buy products in the EU and bring them home. Why wouldn’t you? A 50g pouch of a leading RYO product in the UK costs £14.50. In Spain the same product costs £5.07 and in Belgium £3.94. Outside the EU, products are even cheaper.
Then there’s the black market, smuggled and counterfeit versions of existing brands.
The European Commission has said China is the major source of these products, with 76% of seizures in the EU thought to originate in China. They come from Asia by land and sea, crossing borders with impunity, ending up being sold in car parks and pubs near your shop.
HMRC estimates that in 2011/12, 19% of cigarettes and up to 50% of rolling tobacco was non UK duty paid. Since 2000 the Government has raised its game in fighting the illicit trade, with its Tackling Tobacco Smuggling strategy, but more must be done – as the statistics on this page show. JTI along with other major tobacco manufacturers is a partner in this strategy, and the company is keen to press on retailers the importance of getting in touch with HMRC to report anything suspicious. The number to call is 0800 59 5000.
