Illicit trade criminals earn profits 1,000 times greater than potential fines
New JTI report shows non-duty paid tobacco is costing the exchequer €250 million and the retail trade €450 million annually
23 April 2014
Ireland has one of the highest rates of illegal tobacco trade in Europe and one in four cigarettes consumed are not taxed. Combatting this is a key business priority for JTI. "We are committed to fighting this highly damaging and unregulated trade. This is costing retailers and the taxpayer hundreds of millions, and continues to fuel crime in communities across Ireland," states John Freda, general manager of JTI Ireland.
The illegal tobacco trade has huge societal impacts. Criminals and gangs use children to sell products and channel the profits into other illegal activities. "Cigarettes are at least 50% cheaper on the streets than the ones sold by legitimate retailers, which encourages minors to buy illegal tobacco in unregulated markets and back alleys," stresses Freda.
The report examines potential future drivers of this trade, including the Government’s proposal to introduce ‘plain’ packaging for tobacco products and the revised EU Tobacco Products Directive. In 2012, the Australian Government introduced several tobacco control measures including high excise increases and plain packaging, which have fuelled the illegal trade of tobacco. There has been a 20% increase in the first year following the introduction of these measures according to a new report released by KPMG*
"Ireland already has the highest priced cigarettes in the EU. Plain packaging will only make matters worse and serve the interests of criminal gangs, as it has in Australia," emphasizes Mr. Freda.
*(Source: Illicit Tobacco in Australia – 2013 Full Year Report: KPMG, 2 April 2014)
AT A GLANCE: KEY POINTS
- Non Irish duty paid (NIDP) products are made up of illegal tobacco products sold in Ireland and legal cross border purchases. Revenue’s latest estimate puts the level of NIDP tobacco products consumed in Ireland at 19%
- Industry estimates, which take account of the growth of the roll your own (RYO) segment, estimate that the Irish Exchequer fails to collect duty on nearly one in four of all cigarettes consumed in the State
- In 2013, the Revenue Customs Service, having made 6,888 seizures, confiscated a total of 40.8 million cigarettes, with a retail value of approximately €18.9 million, and 4,203kg of loose tobacco worth approximately €1.7 million
- More than 60% of cigarettes seized in 2013 by the Revenue Customs Service were illegal whites. These illegal cigarettes are manufactured by small indigenous tobacco companies legitimately operating in their own countries but with absolutely no connection to any of the tobacco companies that legally supply tobacco products in Ireland
- On an international level, in 2013 JTI supplied information relating to over four billion cigarettes in over 80 suspect shipments across Europe to the European Anti-Fraud Office (OLAF)
- The average fine imposed by the Irish Courts in 2013 for illegal tobacco related offences was €2,800 with a fine total of €169,750. 87 people were prosecuted during the year
- At €1,064 million, tobacco excise receipts in 2013 continued a year on year decline. This is despite the fact that smoking prevalence has remained relatively constant during 2013 – 2016 indicating further displacement to the illegal trade.
- Of the total government excise take, tobacco excise continues to make up a significant portion at 21.5%.This equated to 2.6% of the total government tax receipts in 2013.
- Cigarettes in Ireland remain the most expensive within the Eurozone region with a premium average price of €9.50 per 20-stick premium pack compared to €3.40 in Poland (as of February 2014).
- 80% of the retail selling price of every packet of cigarettes sold in Ireland goes to the government in excise and VAT