UK: £2bn Lost as Smokers Try to Avoid Tax

Source from:  Express and Star 08/14/2015

A new survey of adult smokers in the region found 39 per cent are buying from 'non-shop sources'.

They are doing so to avoid paying the excessive taxation on tobacco products in the United Kingdom.

It was part of a nationwide poll by Mitchla Marketing/Survey Sampling International.

Non-shop sources takes in purchases from abroad, online, from friends of family, in pubs, in the street, at car boot sales, in vans, at work and in so-called fag houses - private homes selling tobacco.

This surge in 'non-shop' sources has caused the Treasury to lose an estimated £2.1 billion of tax revenue every year because of the shift to non-UK duty paid products. A further £500 million is lost to cross border shopping each year. Collectively, this is the second largest loss to the Treasury after VAT avoidance.

The Treasury has lost more than £360m in tax revenue from the West Midlands alone.

Over the past five years, taxes on tobacco products have risen 40 per cent and tax now account for 80 per cent of the price of a packet of cigarettes - the highest level of taxation on tobacco in the whole of the EU.

The survey found that the primary reason smokers were buying non-UK duty paid products was due to the high prices in the UK - the highest of all 28 EU member states.

Giles Roca, Director General of the Tobacco Manufacturers' Association, has called on the new cross departmental ministerial group set up to oversee a strategy to combat illicit tobacco to review the 'failed policy of high taxation on tobacco products which has benefited no one other than criminals and terrorists who run the black market'.

UK smokers buying a premium brand of 20 cigarettes from a newsagents or other sources which sell tobacco products paying duty to the Treasury are charged over £9.

In comparison, over nine in 10 (89 per cent) of those buying from 'non-shop' sources in the West Midlands pay under £5.

In March 2014, the Government committed to a two per cent above inflation tax escalator on tobacco products, which means that a packet of 20 cigarettes will cost over £10 by the end of this Parliament.

It is the high cost of cigarettes in the UK that has led to half of smokers in the West Midlands (48 per cent) saying that they plan to buy tobacco products from abroad and bring back as many as they legally can, although more than half (51 per cent) admitted they did not know the rules on how many they are legally allowed to bring back to the UK.

One in seven smokers in the West Midlands (14 per cent) now regularly buys their tobacco from abroad to avoid paying UK duty and eight in 10 (77 per cent) smokers said they had no objections to buying non-UK duty paid tobacco as long as it was from a legal source.

Despite smokers in the West Midlands bringing back as many cigarettes as they legally can from their holiday, 61 per cent admitted they were nervous about buying from abroad in case the product was counterfeit.

The poll also revealed that over one in seven (14 per cent) smokers in the West Midlands had bought illegal cigarettes in the UK.

Mr Roca said: "This survey shows that excessive taxation on tobacco products is forcing up prices and driving consumers in the West Midlands away from legitimate sources.

"This is clear proof that the government's high tax tobacco policy is not working." Enditem