Smuggling is being overtaken by a bigger problem for tobacco suppliers and retailers, says Sonya Hook

Let's face it. If a smoker is offered a packet of his favourite brand of cigarettes for £2 less than its usual cost, he'll go for it.
What he probably won't know is whether he's buying smuggled or counterfeit cigarettes. Both are causing huge problems for retailers and the government. The questions are: will reducing tax solve the problem of smuggling and has the clampdown on smuggling actually caused counterfeit cigarette distribution to grow?
Smuggled tobacco products have a huge impact on independents that rely heavily on tobacco profits. The government has introduced measures to combat smuggling, but has so far ignored calls to cut tax. Experts are divided over the impact. Ken Patel, national spokesman for the Tobacco Alliance's Retailers against Smuggling campaign, is in favour. "A smuggler needs no greater incentive to carry out his crime when a packet of 20 cigarettes costs just 39p in Latvia compared with £5.05 here. Smugglers will keep targeting the UK until this is addressed."
Action on Smoking and Health (ASH) wants to see producers such as Imperial Tobacco and Gallaher in the UK treated in the same way as Philip Morris in Continental Europe.
Amanda Sandford, research manager, says: "In Continental Europe, Philip Morris would be heavily fined if cigarettes were smuggled into the area."
In the UK, Imperial has a range of anti-smuggling measures, which include pre and post-supply checks on all customers and destination markets, as well as ceasing trade with distributors if evidence of smuggling emerges. Trade communications manager Iain Watkins says: "Imperial is committed to working with governments and customs to tackle these problems."
But both HM Revenue & Customs and tobacco producers say the biggest issue they face is counterfeiting. A spokesman at HMRC says: "We are starting to see counterfeit cigarettes more and more, which retail at £2.50-£3. Counterfeiting has almost replaced smuggling now as the key issue."
Between 2003 and 2004, 54% of HMRC's national large cigarette seizures were counterfeit compared with 15% in 2001-2002. HMRC has estimated that more than half of all the 'smuggled' cigarettes sold on street corners and in pubs are counterfeit, primarily produced in China or Eastern Europe.
Counterfeit cigarettes are more of a threat to producers than to retailers, of course, because they undermine the brand, especially if they contain high toxin levels and unknown substances.