Illicit tobacco market static despite smoking prevalence falling

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February 2018

The illicit market for cigarettes in the UK in 2016-17 has remained stable since 2010 but while smoking prevalence has declined significantly, illegal sales have become a higher proportion of the total market, according to official statistics.

The findings were revealed in official estimates released by HM Revenue & Customs (HMRC) in its Measuring tax gaps 2017 edition: Tobacco tax gap estimates for 2016-17 report.

Overall, the difference between the tax due and that collected by HMRC – known as the ‘tax gap’ – fell to a record low of 6 per cent in 2015 to 2016 from the 2005-2006 level of 7.9 per cent,

However, because cigarettes form the largest part of the market with the highest taxes, and taxes have increased over the years, this means the total tax gap has grown from £1.9bn in 2010-11 to £2.5bn today.

In 2016, smoking prevalence fell to its lowest recorded level of 15.8 per cent, down from 20.2 per cent of the adult population in 2010.

As a result, the proportion of the market accounted for by illicit sales has increased between 2015-16 and 2016-17 from 13 per cent to 15 per cent of cigarettes although it has continued to fall from 32 per cent to 28 per cent of handrolled tobacco.

HMRC’s illicit tobacco strategy has been in place since 2000, but Deborah Arnott, chief executive of charity Action on Smoking and Health (ASH) said: ‘Funding cuts to local authorities and the failure of the tobacco companies to prevent diversion of their products to the smuggled market have undermined the effectiveness of the government’s anti-smuggling strategy for tobacco.

‘We call on the government to introduce licensing for tobacco manufacturers and retailers and to make the big tobacco companies pay for it.’