from Christopher Ogden, Tobacco Manufacturers' Association
Sir; Amanda Sandford of ASH (The Grocer, Readers' Letters, March 11, p26) thinks that cutting tobacco tax would not cut smuggling. Yes it would. It is a matter of basic economics - reduce the financial incentive for smugglers and cross-border shoppers and the problem goes away. Faced with the prospect of a tobacco black market of UK proportions, the governments of both Sweden and Denmark had the economic nous and political will to cut the tax. As a result, tobacco smuggling is not a pressing issue for them.
Currently 28% of cigarettes consumed in the UK are non-UK duty paid. The majority of these are sourced, local duty paid, from other EU member states where taxes, and therefore prices, are much lower. The total level of UK tobacco consumption, despite the high tax regime, is no different today than it was 10 years ago. All that tax rises have achieved during this time is the encouragement of smuggling and cross-border shopping - and a loss to the Treasury of more than £24bn.
Nevertheless, UK tobacco manufacturers, acting together with HM Revenue & Customs and law enforcement agencies, are making progress in the fight against smuggling. The package of measures announced in the recent pre-Budget report will assist further in this process. Until the UK's level of tobacco duty is addressed, however, the incentives to smuggle and shop cross-border will remain.