Illicit tobacco and alcohol sales cost UK tax payers an estimated £3.7 billion last year, according to a study by law firm Pinsent Masons.
The so called ’tax gap’, which refers to the difference between the amount of tax that should be paid to HMRC, and the amount that is collected, rose 9% last year to a seven year high.
The increase indicates that tax evasion and the illegal importation of tobacco is a growing problem in the UK.
HMRC estimates that the tax gap on overall excise duties is now at a 12-year high of 7.2% and may rise further as people turn to the black market amidst the cost of living crisis.
Organised criminals often import tobacco without paying excise duty. The untaxed goods then make their way to legitimate retailers further down the supply chain.
“Excise duty fraud appears to be a large and potentially growing problem in the UK. Billions of pounds of tax is not paid every year on tobacco and alcohol alone,” said, Pinsent Masons legal director Ian Robotham.
“The logistics of evading that much tax are very substantial – even major retailers could potentially unwittingly play a part in them.
“It’s almost inevitable that HMRC are going to have to try to crack down on the problem due to its sheer scale. HMRC believes more is now lost through non-payment of excise duties than through non-payment of self-assessed income tax and inheritance tax combined.”
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