Tobacco Tax Gaps: Illicit Trade Not Rising
Official figures released today show that the level of tobacco smuggling in the UK in 2014/15 has not risen since last year  According to HM Revenue & Customs, in 2014/15 an estimated 10% of cigarettes consumed in the UK were illicit, the same figure as for 2013/14. The figures for hand rolled tobacco were 35% in 2014/15 compared to 39% in 2013/14 (all figures mid-range estimates).
Since 2000, HMRC (and the UK Border Agency after its establishment in 2008, succeeded by the UK Border Force in 2012) have agreed and implemented a series of detailed strategies to tackle tobacco tax evasion, and the Government provided substantial additional resources for this purpose during the last spending review. The latest of these strategies is “Tackling Tobacco: From Leaf to Light” published on 21st March 2015. ASH welcomes the Government’s focus on cutting tobacco smuggling – in the last Budget Chancellor George Osborne announced two new measures to tackle the illicit tobacco trade. 
• HMRC is expanding the number of criminal investigation teams in HMRC working on tobacco fraud by 50%
• HMRC is also expanding its overseas intelligence network dealing with illicit tobacco.
However, cuts to local authority budgets are affecting the work of trading standards departments across the country, and this could damage enforcement work on illicit tobacco in future years 
The tobacco industry has frequently and wrongly claimed that standardised “plain” packaging of cigarettes and tobacco products could increase illicit trade, although all the key security features on current packaging would also be on standardised packs. These include covert anti-counterfeit marks that can be read by hand held scanners, and an alphanumeric tracking code on each packet that will be required under Article 14 of the EU Tobacco Products Directive, which must be implemented in the UK by May 2016.  The industry will use this argument in the court case against the Government over standardised packaging regulations, due to start in December.
Commenting, Deborah Arnott, Chief Executive of ASH said:
“The latest HMRC figures on tax losses from illicit tobacco show that high tobacco taxes do not necessarily to lead to more smuggling. We are very pleased that the Government is continuing to focus on cutting the level of illicit trade: spending on enforcement in this area is highly cost effective. However, we are concerned that cuts in council budgets across the country will reduce the amount of enforcement work that can be done by trading standards officers. Fighting illicit trade needs action at an international, national and local level.
The tobacco industry routinely uses the threat of illicit trade to try to block tobacco control measures, despite its record of involvement in smuggling. It is still claiming that standardised packaging will make the illicit tobacco problem worse, as well as issuing alarmist press releases about illicit trade every time the Government increases tobacco taxes. But, as usual, there is no good evidence to back their claims. Tobacco smuggling can and must be fought while we also introduce effective policies to cut smoking rates.”
Cigarettes: Illicit Market and Associated Revenue Losses
Hand Rolled Tobacco: Illicit Market and Associated Revenue Losses
The illicit tobacco trade rose from below 5% in the early 1990s to 21% in 2000 (mid-range estimates), in large part due to tobacco companies’ facilitating the smuggling of their own products. In 2000, the UK Government introduced an anti-smuggling strategy and strengthened it in 2006, 2008, 2011 and 2015. Between 2004 and 2010, the European Union also concluded legally-binding agreements with the four biggest tobacco manufacturers, imposing large financial penalties if their own products were found to have been diverted into illicit channels. In November 2014, BAT was fined £650,000 by HMRC for oversupplying hand-rolled tobacco to Belgium 
 HMRC Tobacco Tax Gaps Estimates 2014/15: HMRC
 Summer budget 2015: HM Treasury
 40% cut in trading standards will devastate vulnerable consumers: Chartered Trading Standards Institute
 BAT fined for oversupplying tobacco in low-tax European jurisdictions. The Observer 16 November 2014