The Tobacco Manufacturers’ Association (TMA) has called for the Government to resist increasing tax on tobacco in the Budget on Wednesday (23 March 2011), claiming it could drive illicit sales.
TMA chief executive Christopher Ogden said: “The refreshed Tackling Tobacco Smuggling Strategy is to be announced shortly, yet indications are tobacco duties are set to rise by 2% above inflation at the forthcoming Budget. This would clearly show a lack of joined up thinking as taxation is the acknowledged driver of the illicit tobacco trade. We therefore call on the Government to resist any calls to raise tobacco duties and allow time for the Tackling Tobacco Smuggling Strategy to work.
“The Irish Government recognised that tax increases were driving the illicit trade in tobacco and therefore chose not to raise duties at consecutive Budgets. The Chancellor should be looking to follow their example.”
According to latest data available from HM Revenue & Customs, up to 22% of cigarettes and 61% of handrolling tobacco consumed in 2008/09 avoided UK duty. This equates to a revenue loss to the Treasury of £3.8bn (£10.4m per day).
Ogden said: “As part of the Tackling Tobacco Smuggling review we are working closely with HMRC on a number of specific areas. This is an extremely positive development, but since January 2010 tobacco taxes in the UK have increased more than any other EU Member State. With the possibility of a further tax rise at the Budget, there is great concern the cumulative effect of these tax increases will lead to an escalation in illicit trade thereby undermining our joint efforts to tackle the problem.”