British American Tobacco whacked with £650,000 fine by HMRC for “oversupplying” Belgium cigarette market
(City A.M., November 13, 2014)
British American Tobacco (BAT) has been hit with a fine of £650,000 by HM Revenue & Customs for oversupplying cigarettes to Belgium, which has substantially lower tobacco taxes than Britain.
Apparently, that causes more low-cost cigarettes to be smuggled into the UK.
According to papers seen by the Wall Street Journal, it is the first time a big tobacco company has been fined for “oversupply of products to high-risk overseas markets”, high-risk markets being classified as those that sell cigarettes much cheaper than in the UK.
The penalty for such practises can be up to £5m. But BAT has rejected the charge of oversupplying Belgium and intends to challenge the fine in court. A pack of cigarettes in Britain will set you back £8.47, whereas in Belgium it costs £4.75, according to the Tobacco Manufacturers’ Association.
The Exchequer estimates one in 10 cigarettes sold in the UK is counterfeited, and the government loses as much as £2.5bn each year to the black market. Cigarettes and their producers are seen as an easy target for chancellors seeking to raise money. It has become par for the course in Britain to expect almost every budget to include a rise in tobacco duty.
However, the high price of cigarettes in Britain combined with strong demand has proved an enticing prospect for smugglers. Many cigarette manufacturers fear the scope for black market activity may increase further as a result of the EU tobacco products directive, which will be implemented into national law by mid-2016.
The measures ban flavoured cigarettes, such as menthols, as well as certain pack types like those which contain only 10 cigarettes. In total 45 per cent of the market is set to be impacted by the tobacco products directive.
Ash Ireland welcomes the announcement by the Minister for Finance to increase the price of cigarettes by 40c in the 2015 budget published today. Price is recognised by the World Health Organisation and others as the most important way of encouraging smokers to quit and discouraging young people from experimenting with tobacco. The concerns being raised about ‘smuggling and price increase’ are misguided and mainly fuelled by the Tobacco Industry. Smuggling must be tackled as a separate and very serious criminal issue but it should not impinge on health policy and related decisions.
Dr Ross Morgan, Chairman of ASH Ireland said today, “If the Government is to achieve its objective of establishing a smokefree Ireland by 2025 then it must consistently increase the price of tobacco. Significant inroads have been made in regard to smoking prevalence over the past 10 years with current levels at approximately 21.7%, down from 29% in 2004. It would be possible to reduce smoking levels by a further 10% at least in the next 10 years if there are consistent and significant increases in tobacco price, combined with other measures such as the introduction of standardised packaging”.
Dr Morgan went on to say, “Smuggling of tobacco into this country continues to be a significant issue for Government, however, we must also be wary of Tobacco Industry efforts to use smuggling as a reason for not introducing effective measures, which can improve the nation’s health. Smuggling increases consumption and addiction and therefore is of long-term benefit to the Tobacco Industry. There are many examples of jurisdictions where tobacco price has been increased for health reasons and smuggling simultaneously tackled and reduced – such as Australia, New Zealand and Spain”.
ASH Ireland is disappointed that VAT has not been reduced on Nicotine Replacement Patches and that a 50c environmental levy was not introduced on the Tobacco Industry for each pack of cigarettes sold in this jurisdiction, both of which could have been incorporated in the Budget Statement.
“I ask the Government to continue the fight against smoking, especially with such initiatives as the introduction of plain packaging and the banning of smoking in cars transporting children. Over 5,200 of our citizens die each from smoking, and we must reduce this dreadful statistic by de-normalising smoking, educating young people and adults on the risks and above all introducing pro-health legislation”, Dr Morgan said.
Further information contact :
ASH Ireland, 0818 305055
Wally Young, Young Communications, 087 2471520