A boon to smugglers?

3% extra rise in duty for rolling tobacco ‘step in the wrong direction’

CHANCELLOR George Osborne has been strongly criticised for potentially lending a helping hand to tobacco smugglers with his latest Budget.

George Osborne
A 2% rise in tobacco duty was among the measures announced by George Osborne in his Budget.

Unveiled to the UK Parliament last month, the Budget included a number of announcements on tobacco, among them £31m in funding to the Home Office for a dedicated group of enforcement officers. HMRC will also consult further on stronger sanctions for tackling the illicit market.

However, tobacco duty will rise by 2% above inflation and the duty rate on hand-rolling tobacco will increase by 5%, three  percentage points higher than the existing escalator.

Following a consultation in 2014, the government will introduce a Minimum Excise Tax to increase duty income from lower-cost tobacco products.

James Lowman, chief executive of the Association of Convenience Stores, welcomed measures aimed at combating illegal trade, but said: “The additional 3% duty for hand-rolling tobacco is a step in the wrong direction. Hand-rolling tobacco is particularly common in the illicit trade, and further growing the incentive for criminals to trade in this category is counter- productive.”

Daniel Sciamma, managing director of JTI in the UK said: “With the UK Government’s own figures showing that tobacco smuggling cost £2.1bn in tax revenue last year, this raising of cigarette duties by 2% above inflation and hand-rolling tobacco by 5% above inflation is another incentive for smugglers as it will further widen the price between legitimate and illegal products.”

Other measures in the Budget were more warmly received by the retail industry.

Fuel duty will be frozen for the sixth successive year. Duty on beer, cider and whisky will also be frozen.

And corporation tax will be cut from 20% to 17% from 2020.