MPs have accused HMRC and Border Force of making “painfully slow” progress in tackling tobacco smuggling and of using money earmarked for new initiatives on “business-as-usual” projects.
Of the £25m designated to HMRC for new initiatives to tackle tobacco smuggling, some of the money has funded six overseas intelligence officers already in post, according to the influential Public Accounts Committee.
And by the end of 2012-13, three of the five projects to be funded by investment from the 2010 spending review had yielded nothing. One of the projects, designed to tackle the over-supply of tobacco products to overseas markets and their resulting availability to be smuggled back into the UK wihtout tax being paid, was abandoned due to legal concerns.
“HMRC and Border Force have been painfully slow in implementing new proposals designed to improve performance,” said committee chair Margaret Hodge MP.
Tobacco fraud cost taxpayers £1.9bn in 2010-11, yet there were only 265 prosecutions for tobacco smuggling in 2012-13 and prosecutions for organised crime fell from 62 to 52 in the last year, it added.
The MPs recommended that HMRC and Border Force develop a clear and coherent rationale for the use of prosecutions and other enforcement action within the UK, and urged HMRC to do more work with other agencies to tackle smuggling in the UK.
It cited a successful pilot scheme to tackle tobacco smuggling, launched in 2009, which involved health, trading standards and police services. However, despite the positive results, it has not been rolled out across the UK.
“This committee welcomes innovative approaches. However, HMRC and Border Force failed to make a realistic assessment of what really could be achieved and by when. We are not convinced that the projects will cut revenue loss by £900m by March 2015, as predicted by the department,” Hodge said.
“The department has also failed to challenge properly those UK tobacco manufacturers who turn a blind eye to the avoidance of UK tax by supplying more of their products to European countries than the legitimate market in those countries could possibly require. The tobacco then finds its way back into the UK market without tax being paid,” she added.