Treasury Committee Press Notice No. 14

Session 2004-05 15 March 2005

REPORT PUBLISHED ON EXCISE DUTY FRAUD

The Treasury Committee today publishes its Fourth Report, Excise Duty Fraud, (HC 126, Session 2004-05).

Michael Fallon MP, Chairman of the Treasury Sub-committee which undertook the inquiry, said that:

"Although Customs have made some progress in tackling the problem, losses from excise duty fraud are significant and remain at an unacceptable level. Customs' own figures show that excise duty fraud and smuggling is costing some £3,750 million a year in lost revenue.

Customs and the tobacco industry broadly agree that cigarette smuggling peaked in 2001 at around 21% of the market, and that it is now declining. Customs' strategy for tackling tobacco smuggling appears to be having an effect on illicit cigarettes, but with revenue losses running at £1,900 million a year, there is still a long way to go. Smuggling gangs have increasingly switched their attention to counterfeit cigarettes which are a significant and growing problem that threaten both revenues and public health.

The fact that only 3 out of every 10 packets of hand rolling tobacco consumed in the UK are duty paid is shocking, and a matter of very serious concern. Smuggled hand rolling tobacco has accounted for more than 50% of the market every year since 1999-2000 (when estimates were first produced) and this market share is now rising. Smuggling in this area appears to be out of control and the Committee is calling for effective action to be taken as a matter of urgency.

Customs' estimates of the level of spirits fraud are disputed by the industry who have much lower estimates. There is so much uncertainty surrounding the estimates that Customs' latest figure of £250 million a year falls statistically within a range of minus £150 million to plus £650 million. The Government is convinced that tax stamps on spirits bottles are required to tackle alcohol fraud. Given that the latest estimate of fraud is of a different order of magnitude from the estimated compliance costs this cannot be considered a disproportionate response to the problem."

The Report can be purchased from Stationery Office Bookshops (tel: 0870 600 5522). The full text will also be available on the Internet (www.parliament.uk) at or before 3.30 pm today.

Further Information

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The Treasury Committee is a Select Committee of the House of Commons, appointed to examine the expenditure, administration and policy of the Treasury, the Inland Revenue, Customs and Excise and associated public bodies. All Members of the Committee are Members of the Sub-committee.

Rt. Hon. John McFall (Chairman), L, Dumbarton
Mr Nigel Beard, L, Bexleyheath and Crayford
Mr Jim Cousins, L, Newcastle upon Tyne Central
Angela Eagle, L, Wallasey
Mr Michael Fallon, C, Sevenoaks, (Sub-committee Chairman)
Rt Hon David Heathcoat-Amory, C, Wells
Norman Lamb, Lib Dem, North Norfolk
John Mann, L,  Bassetlaw
Mr George Mudie, L, Leeds East
Mr James Plaskitt, L, Warwick and Leamington
Mr Robert Walter, C, North Dorset