NEW official estimate of the illicit tobacco market: ASH response
The illicit market for tobacco has remained stable between 22/23 and 23/24 according to new data published this morning by HMRC. The overall size of the illicit market is estimated to be 13.8% of tobacco smoked and leads to a loss in taxes of £1.4bn annually in excise tax plus an additional £400m in VAT. [1]
While ASH would still like to see rates of illicit tobacco fall further the progress made over the last 20 years has been significant with rates at 21.7% in 2006/7.
See below graph published by HMRC: https://www.gov.uk/government/statistics/measuring-tax-gaps/3-tax-gaps-excise-including-alcohol-tobacco-and-oils#tobacco
This progress contradicts tobacco industry claims that regulation of tobacco and tax increases are ‘fueling the illicit market’. Yesterday industry representatives were making claims in the media that: “we have now reached a tipping point where not only has tobacco excise become a volatile, poor-quality revenue stream, it is also no longer an effective deterrent.” [2] and claiming that the size of the illicit market would be as high as £4.5bn [note today’s estimate is £1.4bn].
These claims are not supported by the wider evidence nor the assessment published today by HMRC. Rather organisations from the World Bank [3] to the WHO [4] state that tobacco taxes are the single most effective measure for reducing smoking and that the size of a country’s illicit market is linked to multiple factors, such as the effectiveness of its enforcement strategy and supply chain controls, rather than simply the level of its taxation.
Commenting on the new assessment, Chief Executive of ASH Hazel Cheeseman said:
“The progress the UK has made across the last few decades in reducing the size of the illicit market has been impressive and must be maintained. Well-worn tobacco industry arguments that regulations or taxes will explode the illicit market must be taken for what they are – the desperate attempts of a dying industry to prolong its existence.
“We can end the concerns about the illicit tobacco market for good by realising the government’s vision of smokefree country and supporting all of our 6 million smokers to stop.”
Dr. Allen Gallagher, research fellow and Co-Director of the Tobacco Control Research Group, University of Bath, added:
“Availability of independent data on illicit tobacco trade, such as HMRC’s tax gap analysis, is a key component to accurately understanding the problem. These new figures show that the UK’s illicit tobacco trade has remained relatively stable in recent years, serving as evidence that industry claims of a booming illicit market are unfounded. Nonetheless, the persistence of the problem over time demonstrates that there is still work to do to reduce the practice and the many harms associated with it.”
The illicit market from hand rolled tobacco has fallen from 60.8% of the market in 2006/07 to 22.9% in 23/24. The illicit cigarette market has also fallen from a high of 16.9% in 05/06 to 10.5% 23/24. Illicit cigarettes do make up a larger share of the cigarette market in 23/24 than in 22/23 (9.1% compared to 10.5%) but this is not as a result of increased volume of illicit tobacco but rather a smaller overall market for cigarettes in 23/24 with the volume of illicit tobacco holding steady at 2 billion cigarettes.
Notes to the Editor
Action on Smoking and Health (ASH) is a health charity working to eliminate the harm caused by tobacco use. For more information, visit ash.org.uk. ASH receives funding for its program of work from Cancer Research UK and the British Heart Foundation.
For interviews or more information, contact press@ash.org.uk
References
[1] https://www.gov.uk/government/statistics/measuring-tax-gaps/3-tax-gaps-excise-including-alcohol-tobacco-and-oils#tobacco
[2] https://www.lbc.co.uk/opinion/views/tobacco-tax-gap-uk-illicit-trade-debate/
[3] https://documents.worldbank.org/en/publication/documents-reports/documentdetail/491661505803109617/main-report
[4] https://www.who.int/teams/health-promotion/tobacco-control/economics/taxation
[5] https://documents.worldbank.org/en/publication/documents-reports/documentdetail/677451548260528135/confronting-illicit-tobacco-trade-a-global-review-of-country-experiences