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Tax Revenue: Cigarettes

Volume 718: debated on Thursday 11 March 2010

Question

Asked By

To ask Her Majesty’s Government how much tax revenue from cigarettes they estimate they have lost due to (a) smuggling, and (b) imports from the European Union for personal use.

My Lords, the revenue lost due to smuggling in 2007-08 was £1.5 billion. This is down from £2.7 billion in 2000-01. The revenue lost due to imports for personal use is £0.9 billion, of which £0.6 billion came from the European Union in 2007-08, due to lower retail prices in the EU. In January 2010 the UK had an average tax rate, including VAT, as a proportion of the retail price in the EU.

My Lords, I am grateful to my noble friend for that Answer. Does he agree that Britain’s policy for some years now of having a high rate of duty on cigarettes—probably higher than most other EU countries—has been based more on health considerations than on fiscal considerations? Does he further agree that the import of large quantities of cigarettes from the EU, without the ability of the Customs people to stop it, is damaging to health and is undermining the Government’s sensible policies on trying to reduce the level of smoking? Ought we not, as a country, approach the EU and say “Health is not a matter for Brussels; fiscal matters may be”, and suggest that it should look again at the movement of cigarettes into this country?

My Lords, the response from Brussels is that border controls on imports are the responsibility of the United Kingdom. As I have indicated, we have had a marked improvement in the reduction of smuggling over the past 10 years. However, as my noble friend will readily appreciate, the higher we price cigarettes for the wholly commendable and proper reasons of improving the nation’s health and seeking to reduce consumption, the greater the incentive for smugglers.

My Lords, what is the presumption of the number of cigarettes an individual might bring in to measure whether or not they are for personal use?

My Lords, the figure is 3,200 cigarettes over 160 days. A rapid calculation will indicate that that is 20 a day. So for personal use you are allowed to bring in 20 cigarettes a day for six months.

My Lords, I am interested in the confidence with which the noble Lord answered the first part of the Question from the noble Lord, Lord Dubs, about how much is lost from smuggling. Presumably those cigarettes which smugglers attempted but failed to smuggle are out of the equation. How do the Government know how many are smuggled without their knowledge?

My Lords, I thought that question might arise. It is a calculation. Of course, it has to be an estimate. As with everything to do with aspects of crime proceeds, there is an element of estimate. It is the difference between the take the Revenue legitimately gets from cigarettes on which the duty has been paid and the figures from household surveys of cigarette consumption. It is the distinction between those two points.

My Lords, have the Government made an estimate of the reduction in excise duty collected, and taxes generally, on cigarettes following the ban on smoking in public places? Do the Government think that one of the reasons the amount of cigarettes smuggled has fallen is that fewer people are smoking, partly because of the effect of the ban?

My Lords, the health strategy and the Government’s tightening up of border controls have their effect in reducing smuggling. I sought to indicate to the House that there is a significant drop in the amount of cigarettes smuggled into the country. Nevertheless, the House will know that cigarettes are one of the easier commodities to smuggle and it is still done on an unacceptable scale. We are pursuing the most strenuous measures to get the figures down further.

My Lords, why have the Government not set a new target for the reduction of smuggling of cigarettes, given that the latest statistics show that the previous target has already been met? Are the Government now being complacent?

On the contrary, my Lords. I accept of course the noble Baroness’s congratulations on the Government having hit the target thus far. I assure her that the success is based on a strategy which is clearly working. We are intensifying that strategy.

Does the Minister have any figures for the amount of revenue lost due to the smuggling of hand-rolling tobacco? The latest estimate that I have is that 47 per cent of hand-rolling tobacco is illegally imported into this country.

My Lords, the Question was about cigarettes. Hand-rolling tobacco is marginal in comparison to the position with cigarettes. I regret to say that I do not have a figure for hand-rolling tobacco, but I think I can assure the noble Lord—I shall write to him with the specifics—that the problem with regard to smuggling relates to cigarettes.

My Lords, given that the problem of the illegal bringing of tobacco into the country is slightly separate from that of cigarettes being brought in duty-free for personal use, can my noble friend say whether there has been a reduction in the import of cigarettes on that basis since the ban? In what way are the Government underpinning at points of entry their own campaign against smoking, so that people who might bring in cigarettes are discouraged from doing so as far as possible?

My Lords, the figure offered for the personal use of cigarettes is the one which I quoted. It seems to be a reasonable figure given the difficulty of reducing cigarette consumption on the part of people who are addicted to tobacco, and some fairness has to be applied there. We are not reducing that figure, but the reduction of legitimate revenue take on cigarettes is a reflection of the general policy of persuading the nation to smoke less.