Smokers beat taxes by post

Major brands could be imported at £1 a packet less

A company that avoids British excise duty by posting cheap cigarettes from Luxembourg to UK smokers is to look at expanding its service to bigger brands.

Directors of The Man In Black are expected to debate supplying top-sellers such as Benson & Hedges and Silk Cut - for up to £1 a pack off British retail prices - at a meeting this spring.

If approved, the scheme could triple the company's business and turn a minor singe to the treasury's £6bn tobacco revenue into a serious embarrassment for the Customs & Excise. The move might even eventually force the Government to bring its excise duties down to European levels, said Nigel Anderson, a non-executive director of The Man In Black's parent, The Enlightened Tobacco Company.

"I'd love to think it would, because then everyone in the UK would be smoking cheaper fags," said Mr Anderson, former joint managing director of the tobacco giant Gallaher.

Attempts to harmonise British and European excise duties over the last 21 years have all failed, leaving the UK with much higher rates. The gap has already caused a dramatic change in the pattern of beer, wine and spirit purchases. Thousands of Britons aday take ferries to Calais to stock up on cheap booze.

A similar differential between Canada, which has high tobacco tariffs, and the United States caused so much smuggling and cross-border shopping that several provinces were forced to lower their taxes last year.

The Man In Black is already under investigation by Customs & Excise for a three-month-old scheme to deliver Death cigarettes without paying British duties. Government officials say the scheme is illegal and are threatening to charge duty on packages intercepted. So far none have been caught.

The Man In Black says it has expert legal advice that it is operating within European law, which takes precedence over British tax law. Flyers distributed in national newspapers and magazines such as London's Time Out encourage smokers to appoint The ManIn Black as their agent. At no time does the company own the tobacco it handles.

Its customers pay as little as £1.65 for a pack of 20, a saving of £1, all of it lost government revenue. it will not reveal sales figures, but Death has only a tiny fraction of the UK tobacco market, so the cost to the Treasury to date has probably beenmeasured in five figures.

The biggest problems faced by The Man In Black are that the minimum order it can accept is for a carton of 200 cigarettes and that delivery takes up to two weeks. Unlike Americans, who often buy cigarettes in cartons, most British smokers buy a pack at atime.

Mr Anderson said offering popular brands would make it easier for Britons to change their buying habits. However, he is cautious about the move. Although the company's volumes would increase dramatically, its margins might not.