A report published today shows HM Revenue and Customs (HMRC) has slashed the tax gap on illicit cigarettes and tobacco by over half since 2005.
These new figures show the tobacco smuggling tax gap - the amount of estimated duty lost every year to tobacco fraud - has now reduced from 16.9% in 2005, to just 6.9%. Between April 2023 and March 2024 HMRC also secured prison sentences totalling 148 years against 107 cigarette and tobacco fraudsters. In the same period, more than 1.3 billion illicit cigarettes have been seized, worth more than £678 million in tax, along with hand-rolling tobacco worth £41 million, it reports.
The news follows the announcement last month that two crooked carpenters who smuggled millions of illegal cigarettes into the UK inside planks of wood were jailed for nine-and-a-half years. Regimantas Nekrosevicius, 45, and Edvardas Zolynas, 43, used the same timber planks in a dozen shipments to and from Eastern Europe.
The multi-million pound scam was uncovered after 5.4 million cigarettes were seized by Border Force colleagues at the Yorkshire port of Goole, in August 2018. HMRC investigators proved the pair had received more than a dozen deliveries worth an estimated £19.9 million in evaded duty.
Earlier this year HMRC and Border Force published a new illicit tobacco strategy called Stubbing Out The Problem, which set out a continued commitment to reduce the trade in illicit tobacco, with a focus on reducing demand, and tackling the organised crime groups who are responsible. It can be read here.
Exchequer Secretary to the Treasury, James Murray, said: “We’re determined to tackle the tax gap to help rebuild the public finances and ensure everyone pays their fair share. Stamping out the illicit tobacco trade will also cut down funding for wider crime and improve public health.”
In response, JTI noted the new figures published by HM Revenue & Customs (HMRC) and applauded the efforts made to tackle the illegal sale of tobacco in the UK.
“However, it is perhaps not surprising that HMRC and Border Force seized 1.3 billion cigarettes in 2023/24, 215 million higher than in 2022/34, as more smokers are looking for ‘cheaper’ options following the two duty increases in 2023 and the organised criminal gangs behind the illegal trade would be directing increased volumes to the UK,” said JTI public affairs manager Ian Howell.
“Our data, more recent than that of HMRC, shows that although the illegal trade and corresponding tax gap have decreased over the last 20 years, they are now on the rise with 30% of cigarettes and 48% of hand rolling tobacco consumption being non-UK duty paid in 2024 Q2, up from 23% and 33% respectively at the same point in 2023.”
JTI suggested that to “prevent a bad situation getting even worse, the Chanceller should freeze tobacco duty in the forthcoming Budget and invest in further enforcement resources”.
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