Tobacco chiefs under fire on smuggling

Tobacco chiefs were challenged by MPs yesterday on whether they were devoting enough resources to stub out cigarette smuggling, a trade that costs the UK taxpayer £3bn a year in lost revenues.

Tobacco chiefs were challenged by MPs yesterday on whether they were devoting enough resources to stub out cigarette smuggling, a trade that costs the UK taxpayer £3bn a year in lost revenues.

After hearing that Philip Morris, British American Tobacco, Imperial Tobacco and Gallaher employ no more than 200 people between them dedicated to combating smuggling, the MP Nigel Beard said: "You're not exactly breaking the bank on this given your profits, are you? Are a handful of people enough?"

MPs on the sub-committee of the Treasury Select Committee were grilling senior executives from the companies as part of an investigation into excise duty fraud. Although cigarette smuggling into the UK is believed to have dropped significantly since the 1990s, 15 to 18 per cent of cigarettes consumed in the UK are sold illegally.

Nigel Northridge, chief executive of Gallaher, which makes Silk Cut and Benson & Hedges cigarettes, said the bootlegging of cigarettes bought on the Continent was difficult to stop. He called on the EU to agree a fixed limit on tourists can buy legitimately. "We estimate 60 per cent of duty-not-paid cigarettes in the UK come from within the EU. The difficulty is trying to spot the legitimate buyer and the bootlegger. People are tempted because the levels on what you can bring back are confusing," he said.

Philip Morris recently signed up to an historic anti-smuggling treaty with the European Commission as part of a $1bn package to resolve a long-running lawsuit on illicit trade. Ash, the anti-smoking group, has called the agreement the "gold standard" of anti-smuggling agreements and John McFall, a Labour MP, challenged the rest of the tobacco industry to sign up. But the tobacco industry believes its joint "Memorandum of Understanding" with Customs on combating smuggling is enough.

The tobacco industry is very concerned, however, about the rise in counterfeit cigarettes. David Davies, vice-president of Philip Morris, said 190 billion cigarettes are counterfeited each year. "Counterfeit trade is our fourth biggest competitor," he said. Counterfeit cigarettes are thought to make up about 6 per cent of cigarettes in the UK, and the percentage is rising.