The increase in tobacco duty rates by 2% above inflation announced in today’s Budget by the Chancellor of the Exchequer George Osborne shows a lack of joined up thinking, according to the Tobacco Manufacturers’ Association (TMA).
Christopher Ogden, chief executive of the TMA, said: “Government has today increased tobacco duties by 2% above inflation, which clearly demonstrates a complete lack of joined-up-thinking as taxation is the acknowledged driver of the illicit tobacco trade. The refreshed Tackling Tobacco Smuggling Strategy is to be announced shortly, yet this increase will only serve to undermine the effectiveness of this strategy.
”The Irish Government recognised that tax increases were driving the illicit trade in tobacco and decided not to raise duties in the last two Budgets. The Chancellor should have followed 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).
Odgen 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 in any other EU Member State. With the further tax rise announced today, there is great concern that the cumulative effect of these tax increases will lead to an escalation in illicit trade.”