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UNITED KINGDOM

New tax hike makes UK a smugglers’ paradise

24 Mar 2010. Smokers will pay more for their cigarettes, with a tobacco duty increase of 1 per cent above inflation this year and a rise by 2 per cent in real terms each year until 2014.

This means that a packet of cigarettes will cost GBP 0.15  (EUR 0.17, USD 0.22) more, as will a 20-gram pack of tobacco. 

ASH UK (Action on Smoking and Health) welcomes the rise in tobacco duty as a   step In the right direction. Deborah Arnott, ASH Chief Executive said:
"The 15p rise in tobacco tax will encourage some adults to quit but is unlikely to have as strong an impact as a price rise of 5% or more above inflation would have had. Raising the price of tobacco is one of the most effective ways of reducing smoking."

Following the 4% increase in tobacco duty in the new budget, JTI believes that the current Government has taken a backward step by returning to a policy of duty escalation above inflation which will seriously undermine the progress made in reducing tobacco smuggling.

Daniel Torras, Managing Director of JTI UK, commented: "HM Treasury already loses c. GBP3bn (EUR 3.8bn, USD 4.5bn) each year in tax revenue to smugglers, and has lost up to GBP38bn (EUR 42bn, USD 56bn) since 2000/1 to smugglers and crossborder shoppers, the size of the annual UK Defence budget. This tax rise is further good news for criminals who already view the UK as a smugglers paradise and do not care what age their customers are.

This is backed up by the following figures:HMRC estimate that in 2007/8 smuggling and crossborder shopping, collectively referred to as non-UK duty paid (NUKDP) consumption, lost the Government tax revenue of up to GBP4 billion (EUR 4.5bn, USD 6bn) :

- NUKDP share of the total cigarette market up to 24%
- Smuggled share of the total cigarette market up to 17%
- Crossborder shopping share of the total cigarette market 7%
- Counterfeit share of all large scale cigarette seizures 49%
- NUKDP share of the total handrolling tobacco market up to 63%
- Smuggled share of the total handrolling tobacco market up to 54% (pi)