Memorandum submitted by Retailers Against
Smuggling
(I) RETAILERS
AGAINST SMUGGLING
AND THE
TOBACCO ALLIANCE
"Retailers Against Smuggling" is the
campaign of the Tobacco Alliance, which was formed 20 years ago
to voice the views of independent retailers of tobacco on all
matters related to tobacco tax.
Today the Tobacco Alliance represents over 18,500
independent retailers across the UK. It is funded by the Tobacco
Manufacturers' Association.
(II) SUBMISSION
OBJECTIVES
This submission presents the facts on the causes
of tobacco smuggling and the effect it has on independent retailers—and
as a result, local communities across the UK—and suggests
what the Government can do to address this problem.
In making recommendations, "Retailers Against
Smuggling" seeks to encourage the Government to bring UK
tobacco tax levels more into line with the rest of the EU thereby:
— reducing the incentive to smuggle;
— restoring law and order in communities;
— safeguarding the livelihoods of legitimate
retailers.
(III) THE
CAUSE OF
THE TOBACCO
SMUGGLING PROBLEM
UK cigarette smokers pay more tobacco tax than
any other EU Member State. Taxes on handrolling tobacco are by
far the highest in the EU.
TAX BURDEN ON 20 CIGARETTES SINCE 1979
Source: Tobacco Manufacturers' Association, 2004
The burden of tax borne by smokers is a greater
percentage than that on any other excise goods.
High taxes lead to wide price differentials
within the EU. In July 2004, the price of a packet of 20 cigarettes
was £4.82, compared to just £0.37 in Latvia.
A 50g pack of handrolling tobacco costs £9.50
in the UK whilst the cost in Poland is £0.77.
Increasing tobacco tax encourages smuggling,
thereby leading to a greater availability of cheap cigarettes
on the UK market.
With such wide price differences for tobacco
between the UK and the Continent, criminals are increasingly turning
their attention to smuggling cigarettes.
Huge profits can be made by individuals purchasing
duty-paid tobacco products on the Continent and selling them in
the UK. Needless to say, tobacco products sourced from elsewhere
in the world, especially counterfeit, can realise even greater
profits for the smugglers.
Tobacco is light and relatively easy to transport
(when compared to alcohol, for example).
The penalties for those caught smuggling tobacco
are minor compared to, for example, drug smuggling.
The chances of being caught and imprisoned are
insufficiently high to deter smugglers.
There are not sufficient HM Customs & Excise
officers or scanners to provide enough of a disincentive to smuggle.
Latest Customs' estimates are that 27% of cigarettes
and 69% of handrolling tobacco consumed in the UK are non-UK duty
paid.
(IV) THE
EFFECT:
(a) On Independent Retailers
The following information comes from "The
Impact of Smuggling and Cross-Border Shopping on Independent Tobacco
Retailers" carried out by Albermarle Marketing Research in
2004 on behalf of "Retailers Against Smuggling". A fuller
version of the statistics is included in the PowerPoint presentation
"Economic Research 2004" accompanying this submission.[1]
One in four retailers is considering closing
as a result of the effects of tobacco smuggling on their sales.
Last year, tobacco smuggling reduced the average
retailer's sales by £49,736.
The effect of the fall in sales has been significant
enough for 28% of retailers to consider reducing the number of
staff they employ and 25% of retailers have actually cut jobs.
95% of retailers are aware of tobacco smuggling.
74% report being aware of tobacco products being
sold illegally in their area.
88% of retailers report that smuggling has decreased
their tobacco sales, with 36% claiming that there has been a dramatic
decrease.
74% of retailers expect the situation to get
worse.
93% don't think the Government is doing enough
to help retailers affected by smuggling
Tobacco smuggling is often seen as a "victimless
crime". However, it is clear that there are victims of the
black market in tobacco, specifically the retailers of tobacco
products.
Retailers are not the only losers: Treasury
tobacco revenue losses since records began in 1995 have already
exceeded £20 billion.
(b) On Communities
Independent retailers continue to fulfil an
essential role in the community.
It is these retailers who provide a vital service
to those with particular local needs: the elderly, people without
access to transport and disabled people.
More lost jobs and more shops closing leaves
communities without the local supplier that they have always been
able to depend upon.
(c) On Law and Order
Smuggling has become "big business,"
and is being organised by criminal gangs who are often violent.
Smuggling tobacco is a significant threat to
law and order in the UK. Criminality is on the increase. The penalties
for tobacco smuggling are not as severe as those for drug smuggling.
However, tobacco smuggling is proving to be equally profitable
for the criminal gangs involved. Similar rewards, lower risks.
Rising levels of organised crime across the
UK will clearly have a negative impact on regions already characterised
by high levels of deprivation, social exclusion and poverty.
The longer the delay in tackling the root cause
of the problem—ie. the UK's high tobacco tax regime—the
greater will become the grip of criminality. A black market, once
established, is very difficult to eradicate.
(d) On Young People
Almost a third (29%) of retailers know of smugglers
supplying underage smokers.[2]
Smugglers do not care who they sell their goods
to—children have easier access to tobacco on the black market
than from legitimate retailers who demand proof of age.
94% of retailers are in favour of a national
proof of age card.[3]
CitizenCard is by far the best known.
Initiatives such as the CitizenCard "No
ID No Sale" campaign will be undermined if black market accessibility
continues unchecked.
(V) CONCLUSION
AND RECOMMENDATIONS
UK tobacco taxes are well above those in the
rest of the EU. This must be addressed.
20 CIGARETTES ACROSS THE EU—JULY 2004
Source: Tobacco Manufacturers'
Association, July 2004.
HM Customs and Excise do not have sufficient
resources to eradicate smuggling. Its seizures represent just
a small proportion of the total quantity of bootlegged and smuggled
tobacco.
The great majority (73%) of retailers believe
that to combat the tobacco smuggling problem taxes should be frozen
or reduced.[4]
The Government must give serious consideration
to bringing the UK's tobacco tax levels more into line with those
of our European partners, as has been done recently, for example
in Denmark and France. Until this happens smuggling-related crime
will rise, more retailers—the backbone of communities across
the land—will be forced to close, and more jobs will be
lost across the UK.
1 November 2004
1 Not printed. Back
2
The Impact of Smuggling and Cross-Border Shopping on Independent
Tobacco Retailers, Albermarle Marketing Research, 2004. Back
3
Ibid. Back
4
The Impact of Smuggling and Cross-Border Shopping on Independent
Tobacco Retailers, Albermarle Marketing Research, 2004. Ibid. Back
| 
