JTI ASA RESPONSE ### MEDIA INFORMATION For immediate release

Transcription

1 MEDIA INFORMATION For immediate release JTI ASA RESPONSE United Kingdom, (17 th April 2013) It is clear that the black market in tobacco is a massive problem for the Exchequer. HMRC s upper estimates put the cost at just over 3 billion in lost revenue. The ASA upheld the complaint because JTI did not mention that the figure was based on HMRC s upper estimate for smuggled cigarettes and hand rolling tobacco. The figure of 3 billion has been widely used by many parties, including HMRC officials, to describe the loss in revenue to Government. Whatever word or figure is used to describe the scale of this issue, it is a huge problem which should be a concern for all said Paul Williams, JTI s Head of Corporate Affairs UK. In the last month alone, HMRC reported that 1.5 tonnes of illicit tobacco were seized from a vehicle on the M4 and that 30 million smuggled cigarettes that are believed to be counterfeit have been seized at Southampton container port. JTI believes that plain packaging will only make the counterfeiters task cheaper and easier. This ruling comes as a result of one complaint made to the ASA, from a group which campaigns and lobbies for tobacco control measures rather than from any member of the general public. Williams said: Whilst we will not publish the advertisement in question again, we disagree with those who appear to wish to close down this debate by challenging the semantics of our statements rather than the substance. We will continue to express our concerns, as it is essential that common sense and sound evidence prevail. For more information on JTI s views please read our submission to the consultation, available at: For further information, please contact: ### JTI UK Jeremy Blackburn +44 (0) Page 1 of 5

2 Cardew Group David Roach +44 (0) Georgina Hall JTI is a member of the Japan Tobacco Group of Companies, a leading international tobacco product manufacturer. It markets world-renowned brands such as Winston, Mild Seven and Camel. Other global brands include Benson & Hedges, Silk Cut, Sobranie, Glamour and LD. With headquarters in Geneva, Switzerland, and core revenue of USD 11.8 billion in the fiscal year ended December 31, 2012, JTI has operations in more than 120 countries and about 25,000 employees. For more information, visit Notes to Editors 3 billion The 3 billion figure in the advertisement related to HM Revenue & Customs (HMRC) upper estimate of the revenue loss (both excise duty and VAT) due to tobacco smuggling in the fiscal year 2009/10. This was published in the report Measuring Tax Gaps , published on 21 September 2011 which was the latest version available when the advertisement was published. In detail, the figure for the upper estimate of the revenue loss was 2,200 million for cigarettes (Table 4.1) and 880 million for hand-rolling tobacco (Table 4.5). The total revenue loss was therefore 3.08 billion. The figure of 3 billion has been used by HMRC itself to emphasise the cost of the illicit tobacco trade to the taxpayer; John Whiting (a Non-Executive Director on the board of HMRC), for example, gave evidence to a parliamentary committee (the Northern Ireland Assembly Committee for Justice) during a Northern Ireland Crime Strategy Session on 27 October 2011 that tobacco fraud is massive and costs the UK Government in the region of 3 billion a year. 2 JTI did not mention that the 3 billion figure was HMRC s upper estimate however the figure itself is not incorrect. Since then, with the publication of Measuring tax gaps on 18 October 2012, the upper estimate of revenue loss for 2009/10 has been revised, with the upper estimate of revenue loss now put at 2,300 million for cigarettes and 810 million for hand-rolling tobacco, so 3.11 billion altogether. Based on all the available HMRC estimates 4 since the Tackling Tobacco Smuggling strategy was unveiled in March 2000, 5 the upper estimate for revenue loss as a result of tobacco smuggling is 38.8 billion from (see Table 1) Official report (Hansard) of the Committee for Justice Northern Ireland Organised Crime Strategy , 27 October 2011, available at Report/Committee-Minutes-of-Evidence/Session /October-2011/Northern-Ireland-Organised- Crime-Strategy /. Mr Whiting is also the Tax Director of the Office of Tax Simplification and holds an OBE for services to the tax profession Page 2 of 5

3 Table 1: HM Revenue & Customs upper estimate of revenue loss from tobacco smuggling Cigarettes Hand-rolling Tobacco Total million 2000/1 3, , /2 3, , /3 2, , /4 3, , /5 2,800 1,000 3, /6 2, , /7 2, , /8 2, , /9 2, , /10 2, , /11 2, ,910 Total 29,100 9,700 38,800 Page 3 of 5

4 Booming HMRC s latest estimate of revenue loss from tobacco smuggling is for 2010/11 i.e. up as far as March 2011, latest estimates are already 2 years out of date. The next public information for figures to March 2012 is not due for release until late The analysis below shows the sharp upturn in and the information will enable you to make your own judgment on our belief that is booming. MS Intelligence conducts a regular Empty Pack Survey (EPS) for tobacco manufacturers, which seeks to get a more up to date estimate of levels of non-duty paid cigarettes. This survey covers the period up to the end of In 2011 the EPS shows a level of cigarette non-uk duty paid () consumption, i.e. an assessment of smuggling and cross-border shopping, of 17%, rising to 21% in The revenue loss from cigarettes based on these levels, set against the duty paid market measured through HMRC s clearance data, and the average tax collected from a pack of cigarettes 6 is 2.15 billion in 2011, rising to 2.90 billion in Table 2: Revenue loss from non-uk duty paid cigarette consumption based on Empty Pack Survey Cigarette clearances (%) Total Revenue Loss ( million) Average Tax Burden ( per 20) % , % , EPS does not cover hand-rolling tobacco. However, since 2008 JTI has conducted its own pack swap survey of hand-rolling tobacco consumption. In 2011 this stood at 50%, falling to 47% in The revenue loss from hand-rolling tobacco based on these levels, set against the duty paid market measured through HMRC s clearance data, and the average tax collected from a 25g of hand-rolling tobacco is 1.11 billion in 2011, rising to 1.17 billion in Table 3: Revenue loss from non-uk duty paid hand-rolling tobacco consumption based on JTI Hand-rolling clearances (%) Total Revenue Loss ( million) Average Tax Burden ( per 50g) ,894 50% 5,894 11,698 1, ,289 47% 5,577 11,866 1, Therefore, the total revenue loss from tobacco consumption, based on industry data, was 3.26 billion in 2011, rising to 4.07 billion in 2012, a 24.8% increase. In our view in today s economic climate this development justifies the use of the word booming. 6 Page 4 of 5

5 These estimates cover both smuggling and cross-border shopping, whereas the HMRC figures in the previous section only cover smuggling. If the HMRC estimates of cross-border shopping that are associated with the upper estimate for smuggling in 2009/10 are included, the total revenue loss for that year was 3.62 billion. Looking at the available HMRC data since 2000/1, the total upper estimate of revenue loss from consumption over the period is 48.8 billion (see Table 4). Table 4: HM Revenue & Customs upper estimate of revenue loss from tobacco smuggling and associated levels of cross-border shopping Smuggled Cross-border Total Handrolling Handrolling Cigarettes Cigarettes Tobacco Tobacco million 2000/1 3, , /2 3, , , /3 2, , , /4 3, , , /5 2,800 1, , /6 2, , /7 2, , /8 2, , /9 2, , /10 2, , /11 2, ,420 Total 29,100 9,700 8,700 1,380 48,880 Page 5 of 5