BLACK MARKET BILLIONS

A significant amount of tax revenue is lost to illicit trade in alcohol and tobacco every year

BILLIONS of pounds of tax have been lost to the booze and tobacco black market over the last decade.

Figures from the HMRC reveal that £36.8 billion of tax revenue has been lost due to the illicit market in spirits, beer, cigarettes and hand-rolling tobacco between 2007/08 and 2018/19.

This is the amount lost in both VAT and alcohol and tobacco duty, which as well as being a source of revenue for the government is intended to reduce consumption.

Those bringing black market alcohol and tobacco into the country can face fines and even jail time - as in the case of a recent multi-million pound importation scam.

Four men were found to have smuggled 17 million non-uk duty paid cigarettes and 1.4 tonnes of hand-rolling tobacco into the UK from southeast Asia in 2014/15 evading £4.3 million in duty and VAT.

They were sentenced to 25 and a half years in prison between them, and have recently been ordered to pay back nearly £1.0 million of the amount owed.

The illicit trade of alcohol and tobacco makes up a significant share of the entire market in these goods.

The figures show that a third of all hand-rolling tobacco sold last year was black market (34%), as was 9% of cigarette sales.

Meanwhile, 13% of all beer sales were black market, although the illicit trade of spirits made up 0% of total sales.

In previous years black market spirits have made up as much as 11% of the total market share, however.

John O’connell, chief executive of the Taxpayers’ Alliance, said: “The tax gap in booze and cigarettes is a classic case of the taxman cutting off his nose to spite his face.

“Punitively high rates see billions lost to the black market, with the gap going up as criminals capitalise on demand for affordable alcohol and tobacco. These dodgy illicit markets damage public health and the public pursue at the same time.

“Cutting the rates and simplifying the duties, instead of constant and counterproductive hikes, remains the best solution.”

The amount of tax lost to the booze and tobacco black market is only a small proportion of the total “tax gap” - the difference between the amount of tax that should be paid, and what is actually paid.

The full tax gap came to £31.0 billion in the last year alone - 4.7% of the total amount that should have been collected.

As well as tax lost to the black market, it includes money lost to tax avoidance and evasion, tax mistakes, fraud, and outright non-payment, among other things.

A government spokesperson said: “Tackling alcohol fraud and illicit tobacco continues to be a priority for the government. HMRC’S alcohol strategy has successfully increased the revenue we protect through our compliance activity to over £1 billion a year. Since publication of the Alcohol Strategy in 2010, HMRC has seized 77 million litres of alcohol with a duty value in excess of £155 million to the end of 2018-19.

“The UK has had a strategy in place to tackle tobacco smuggling since 2000, which has resulted in significant reductions in the size of the illicit market. In the financial years 2017-18 and 2018-19, over 2.8 billion illicit cigarettes and over 439 tonnes of hand-rolling tobacco were seized, resulting in 628 positive charging decisions.

“The proportion of UK adults who smoke has fallen from 27.0% in 2000 to 14.7% in 2018, a successful outcome of government public health policies including higher excise duties.

“Levels of taxation alone do not explain smuggling levels, as some countries with relatively low rates of duty experience widespread smuggling.”