Sales of illicit tobacco in the UK have continued to climb, new data from HM Revenue & Customs (HMRC) has confirmed.
Illicit cigarettes now account for 9% of the market, up from 7% the previous year, with an associated revenue loss of £1.1 bn, the annual Measuring Tax Gaps report shows.
The problem is considerably worse for Roll Your Own (RYO) where the study’s mid-point estimate shows an illicit market share of 36%, up from 35% in 2011/12.
The associated revenue losses for RYO is estimated to be around £900m, up from £700m the previous year.
The significant rise was down to “higher duty rates and prices in 2012-13 together with a slight increase in the illicit volumes consumed,” HMRC said.
The figures mirror those from earlier tobacco industry surveys of the non-UK duty paid market.
JTI managing director Jorge da Motta said the “disappointing” results came as “no surprise”.
“JTI have been very clear in stating its view that the high level of tobacco tax in the UK relative to other European countries would result in a rise in non-UK duty paid consumption,” he added.
The report also highlights the UK’s significant problem with alcohol duty fraud. According to the data, duty fraud on wine cost the Exchequer £350m in revenue in 2011-12, as criminals diverted wine intended for sale in other European states onto the UK market. It estimates that one in 16 of the bottles of wine sold in the UK are now illicit.
Federation of Wholesale Distributors chief executive James Bielby said: “Today’s figures confirm what our members have known for some time, which is that the supply of wine in the UK is out of control. Criminal operators have been allowed to set up and thrive in direct competition with law-abiding wholesalers.
“HMRC has previously said it cannot act on this issue without an official measure of the loss to the public purse. These new figures provide that measure, and we expect HMRC and the Border Force to take swift and effective action to put the rogue supply chain out of business, such as our proposal for a rigorous registration scheme for alcohol wholesalers,” he added.