HM Customs and Excise 1

9 November 1999

CRACKDOWN ON TOBACCO FRAUDSTERS

The compulsory marking of cigarette and tobacco packs to show that UK duty has been paid is one in a number of hard-hitting measures to crack down on the criminal practices of smuggling and pushing untaxed tobacco unveiled today by Chancellor Gordon Brown.

The package of measures, which follow Martin Taylor's independent advice on enforcement strategy, will strengthen Customs' ability to tackle tobacco smuggling and includes:

• a national network of container x-ray scanners to help detect shipments of smuggled tobacco hidden in commercial freight;



• compulsory marking of UK duty-paid cigarettes and tobacco to make identification of smuggled tobacco easier;



• new offences and penalties for those smuggling, handling or selling untaxed tobacco;

toughening the penalty regime for those smuggling tobacco or involved in its subsequent sale or possession:

- confiscation powers against criminals' assets, including smugglers, will be enhanced;

- proposals for a new licencing framework, to be published next year, will provide for a more graduated range of penalties such as the temporary closures of pubs and other licenced premises.

There is a strong ongoing health case for year-on-year real terms increases in the price of cigarettes and tobacco. The Chancellor will in future form his budget judgements on the appropriate level and timing of increases taking into account a wide range of factors, including the Government's health objectives. Any additional revenue raised from real increases in tobacco duties in future would be spent on improved health care. For example, the extra revenues from a 5 per cent real terms rise in tobacco duty would raise £300m that would go to a further additional investment in the national health service from next April.

NOTES FOR EDITORS

1. In the 1999 Budget the Chancellor emphasised that fraud and smuggling presented a serious threat to the Government's health and revenue objectives. An independent evaluation of the anti-smuggling strategy was announced and Martin Taylor, now chairman of WH Smith, appointed in August 1999. The Chancellor has now received advice from Martin Taylor and will be considering that in detail.



2. Customs' latest estimates for revenue lost (excise duty and VAT) through cross-Channel smuggling in 1999 and cross-border shopping in 1998 are set out in the table below:

Figures have been independently rounded to £5 million. Components may not therefore sum to the totals shown.

Figures do not include any amounts for smuggling by air passengers, or revenue evaded through commercial fraud or in very large freight consignments

The figures shown use Customs' assumption that between 70 per cent and 80 per cent of all alcohol purchased abroad substitutes for similar purchases in the UK.

This year, almost £1½b of revenue is expected to be lost through illegally-imported tobacco hidden in freight containers. Customs' latest assessment of overall revenue losses associated with all forms of tobacco smuggling in 1999 is of the order of £2½ billion.

The Government, having taken advice from Martin Taylor, will introduce a range of measures designed to tackle the evasion of tax on tobacco. These will include:-

The increased use of new technology, including x-ray scanners

Mobile scanners - are ideal for scanning small vehicles and small containers. Their mobility makes them suitable for rapid re-deployment as smuggling patterns

change and they will be a valuable deterrent to smugglers shifting traffic in order to

try and avoid detection. A number of these will be deployed;

Relocatable scanners - capable of providing a good quality image are suitable for larger containers and can be dismantled, transported and re-installed in a matter of days. They will enable Customs to respond quickly to changing smuggling patterns;

Finally, fixed scanners are capable of providing high powered images of the contents of large containers.

The use of pack marks to counter tax evasion and forestalling

The complete pack mark will fill the centre of the top third of the front face of the pack. So anyone buying or selling tobacco will know immediately whether they are dealing with legitimate goods and it will make it easier for the police and trading standards officers to help C&E in their enforcement role. Mock-ups of marked packets are available from Customs & Excise press office.

Following the introduction of pack marks, new offences will be brought in to ensure that those who deal in smuggled goods can be prosecuted more quickly and effectively.

Tobacco manufacturers and importers avoid duty increases by building up large stocks of cigarettes in the months leading up to a Budget change. Such forestalling costs the Exchequer around £300 million a year. The new mark will help to reduce stockpiling by at all points in the supply chain by making it an offence to sell tobacco products after the date show on the mark.

C&E will publish a technical note and a draft regulatory Impact Assessment relating to the introduction of pack marking. It can be obtained from Chris Mountford on 0161 827 0354 or found at Customs' website at http://www.hmce.gov.uk./bus/excise/fisctob.htm.

Media enquiries only to:

HM Customs and Excise, Public Relations Office, New King's Beam House, 22 Upper Ground, London, SE1 9PJ. Telephone: 0171 865 5471/5472.

Other individuals or companies should contact their local VAT Business Advice Centre, listed under Customs and Excise in the telephone book.

Customs and Excise Internet address: http://www.hmce.gov.uk

This news release can also be found at: http://www.hm-treasury.gov.uk

Other Treasury material can also be found at this address.

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