UK: ''Lack of Action'' on Tobacco Firms

Source from:  Press Association 06/16/2014

MPs have complained of a "farcical" lack of action against tobacco manufacturers in a stinging assessment of Government efforts to tackle smuggling.

An investigation by the Commons home affairs select committee said failures in dealing with illicit cigarettes were "a matter of grave concern".

But it also suggested that concerns over boosting the black market should not trump public health considerations in the debate over plain packaging.

Rogue products smoked in the UK soared by 49% to a billion in 2012, it said, suggesting a reduction in enforcement action.

And the committee was especially scathing of the failure to fine a single firm for deliberately oversupplying cigarettes to high-risk markets so they can be smuggled back to the UK.

The taxpayer loses out on around ￡2 billion in unpaid duty because of the illegal trade.

The committee welcomed efforts by HM Revenue and Customs and the Border Force to address acknowledged communication failures, but said more needed to be done to beef up their joint strategy - which was introduced in 2011.

"We are worried that not enough is being done by the Government and its appropriate agencies to combat the problem of tobacco smuggling at source," the cross-party group continued.

"We urge the members of HMRC and Border Force set up firm relationships with their counterparts in countries such as Malaysia. This will ensure that intelligence and best practice is shared.

"While there have been some high profile successes, over the last three years the numbers of prosecutions and convictions for organised crime cases involving tobacco have fallen.

"We do not believe that these numbers are decreasing due to the reduction in this type of crime and are deeply concerned that these figures may indicate a reduction in enforcement action.

"It is astonishing that no UK tobacco manufacturer has ever been fined for oversupply of products to high-risk overseas markets, and that only one statutory warning letter has been issued.

"The penalties available are too weak and enforcement too rare. We find it farcical that a respected enforcement agency such as HMRC has not imposed tougher punishments on those over-supplying overseas markets.

"We recommend that HMRC publish a clear set of criteria setting out the circumstances in which it would normally impose a fine and that an immediate review be taken against all historic and ongoing cases against this criteria in order to ensure those who have committed an offence do not go unpunished."

More firms should be named and shamed when they were prosecuted, the report suggested.

Committee chair, Labour MP Keith Vaz MP, said: " It is vital that there is no reduction in enforcement action. The time of Jamaica Inn is over and our fight against tobacco smuggling must be a priority."

The report said the Government's decision on whether to press ahead with proposals to require cigarettes to be sold in plain packs - which critics claim would increase the illicit trade - should be " driven by health reasons and the imperative need to reduce the numbers of young people who start smoking".

Even if the move would increase the illicit trade, they said, "we believe that the proper response would be a more vigorous effort on enforcement rather than any lessening in the Government's drive towards introducing standardised packaging".

An effective "track and trace" system could overcome the concerns which had led the Government to take a "cautious approach", the MPs suggested.

Mr Vaz said: " The standardised packaging decision should be made on the basis of health. It is vital that consideration of the potential effects on smuggling is thorough and common sense steps are taken to ensure that criminal gangs do not profit from the Government's decision."

In April, the Department of Health announced that it was to launch a consultation on the measure after a review concluded the initiative could contribute to a "modest but important reduction" in smoking rates.

The Sir Cyril Chantler review concluded that the measure, which would see cigarettes and other tobacco products put in drab and purposefully unattractive packaging, would contribute to a reduction in the prevalence of smoking.

Health experts have long campaigned for the measure to be introduced, saying that brightly coloured packages are the last marketing ploy that tobacco companies use to lure people to their products.

But smoking groups claimed that stripping cigarette packets of branding would lead to an increase in illicit trade of tobacco products and job losses.

A Border Force spokeswoman said: "The priority for Border Force is security of the UK border and that means both passengers and goods.

"Overall cigarette seizure performance has steadily improved and Border Force and HMRC are working closely together to address the source, supply and demand for illicit tobacco in the UK.

"Joint work and intelligence sharing between Border Force and HMRC has resulted in more than half of all cigarette seizures being made abroad before illicit tobacco reaches the UK border.

"Since the launch of the first tobacco anti-fraud strategy in 2000 we have seen the illicit market for cigarettes reduce from 21% to 9% and 61% to 36% for hand-rolling tobacco.

"The launch of the National Crime Agency means more intelligence is now being shared between agencies to further strengthen the UK's ability to crack down on serious and organised criminals."

HMRC responded in a statement: "Tackling tobacco smuggling is a priority for HMRC.

"Since 2000, we have more than halved the size of the illicit market in cigarettes. Since 2012, we have seized 3.3 billion cigarettes, over 800 tonnes of illicit hand-rolling tobacco and have prosecuted 593 criminals involved in the fraud.

"We are determined to disrupt the criminal networks at the heart of this trade using every method available."

Jonathan Isaby, chief executive of the TaxPayers' Alliance, which campaigns for lower taxes, suggested high levels of duty were to blame for making tobacco a "lucrative" trade.

"The easiest way to fight the illicit trade is surely to make it less rewarding," he said.

"With taxes on cigarettes and tobacco so high compared to the cost of the products, it's little wonder that smugglers see the UK as a lucrative market, meaning billions of pounds in tax revenue are lost every year.

"As the authorities rightly try to crack down on smuggling, the last thing they need to contend with is tobacco products in plain packaging, which would make life even easier for the smugglers.

"As we are seeing in Australia, plain packaging ends up benefiting the criminals at the expense of taxpayers and costs the Treasury even more in lost income." Enditem