£16.7 Billion Loss in Smoking Tax Revenues

The UK Government has lost at least £16.7 billion tax revenue from the black market sale of cigarettes and hand rolling tobacco over a 5 year period, according to its own statistics, says a report released today.

Every year Her Majesty’s Revenue and Customs (HMRC) estimates how much tax revenue is lost to the black market. ‘Measuring Tax Gaps’ is an annual report looking at a range of ways in which HMRC loses out on revenue, from Income Tax and National Insurance to VAT and Corporation Tax.

This annual report also looks at the duty lost to illicit trade of goods like tobacco, and provides figures for the amount lost in the previous five financial years.

A special report released today by the TPA analyses these figures, and also highlights the news that HMRC constantly revises its figures upwards: for example, it has revised its figures for the illicit trade in cigarettes upwards by £1 billion, and for hand rolling tobacco by £140 million.

Illicit cigarettes make up 16% of the market, and hand rolling tobacco a staggering 50% of the market, according to HMRC’s latest figures.

These figures only take into account the loss of revenue from smoking products that are bought illegally.

There are few accurate estimates of the additional revenue lost from the many thousands of cross-border shoppers who buy their cigarettes and tobacco for their own use perfectly legally from within the EU.

The UK and Ireland have the most expensive cigarettes in the EU – twice the price of an identical packet in Luxembourg and Malta. The tax alone on an average packet of 20 cigarettes in the UK now amounts to over £5.75.