Tackling the Illicit Tobacco Trade

• Thetobaccoindustrycontributesintheregionof£11.5billionperannumtotheExchequer.Throughoutthesupplychainandinforwardlinkages,theindustrysupportstensofthousandsofjobsintheUK.

• TheTMA’smembercompaniesalsoinvestheavilyinresearchanddevelopment,particularlyinregardtonextgenerationproductssuchase-cigarettes.

• However,theillicittradeintobaccoproductsremainsasignificantchallengeforthesectorandathreattotobaccotaxrevenues.In2015/16,theconsumptionofillicittobaccointheUKcosttheExchequer£2.4billioninlosttaxrevenue1,thesecondhighestsinglelosstotheTreasuryafterVATavoidance.

Overview

• Thelandscapewithinthetobaccosectorhaschangeddramaticallyoverthepastyearwiththeintroductionoffar-reachinglegislation.TheEUTobaccoProductsDirective(TPD)whichhasbannedpacksoffewerthan20cigarettesandhandrollingpouchesoflessthan30gandtheintroductionof(plain)standardisedtobaccopackagingarecreatingnewchallengesintacklingillicittobaccoproductsassmokerscannolongerpurchasetheirpacksizeofchoicethroughlegitimatechannels.Counterfeit plain packaging has already been seized in parts the UK.

• BrexitpresentsmanypotentialchallengesbutthereareopportunitiesfortheGovernmenttoconsidertoo.TheintroductionoffixedlimitsonpersonalimportsfromtheEUintotheUK,bringingitintolinewithcurrentduty-freeallowances,wouldprovideclarityforBorderForceofficers.

Changing landscape

Sources:1:TobaccoTaxGapEstimates2015-16;2:https://a-cg.org/asset/011916_counting_the_cost_of_counterfeit_goods-ipo-report-manchester.pdf

Tackling illicit tradeThe industry takes the threat from the illicit market very seriously and is working across the globe with law enforcement and other stakeholders to counter the threat posed by smugglers and the organised criminal groups who dominate the illicit trade.

IntheUK,muchoftheindustryactivitytotackletheillegalmarketcomesundertheMemorandumofUnderstanding(MoU)thattheTMAmembercompanieseachhavewithHMRevenue&Customs(HMRC).ThisMoUcreatesacomprehensiveframeworkforco-operationaimedatcombatingthesmugglingofbothgenuineandcounterfeittobaccoproductsintotheUKaswellasseekingtodeterallaspectsoftheillicittradeintobaccoproducts.

Fromanindustryperspectivethiscanbesummarisedasafivestepapproach:

1.Intelligence

2.Insight

3.Technology

4.CollaborativeWorking

5.MobilisingSupport

CASE STUDY

Cheetham HillThetobaccoindustryplayedaconsiderableroleinthedisruptionoftheillicittobaccotradeinCheethamHill,Manchester,the‘counterfeitcapital’oftheUK.Theindustrydeliveredintelligencetoenforcementagenciesaspartofabroaderclampdownonillegalcounterfeitgoods.Intotalaround£5mofcounterfeitgoodswereseizedandledtotheclosureofmorethan30premises.

FurtherdetailscanbefoundintheIPO’sreportontheoutcomesoftheoperation2.

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£5m

Source:ManchesterEveningNews,January2016

Illicit tobacco presents significant challenges for legitimate businesses, law enforcement, government revenues and communities. This briefing sets out the role of the TMA in tackling this pernicious trade.

£2.4bn

IN2015/16,THECONSUMPTIONOFILLICITTOBACCOINTHE

UKCOSTTHEEXCHEQUER£2.4BILLIONINLOSTTAXREVENUE1

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Intelligence:theindustrygeneratesconsiderableintelligenceontheillegaltobaccomarketataninternational,nationalandlocallevel.Withanon-the-groundpresencetheindustryisabletoprovideintelligenceanywhereintheUK.Thisissharedwiththeappropriatelawenforcementagencies.In2016,TMAmembercompaniesassistedHMRCwithover1,100piecesofintelligenceandrespondedtoover1,500requestsfromenforcementagenciesforassistancesuchasperformingbrandanalysis.ThevolumeofintelligencegeneratedanddeliveredbytheindustryhassupportedenforcementactionacrosstheUKandinturnledtoasignificantincreaseinnumberofseizuresandprosecutions.

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Tackling illicit trade

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Technology:thetobaccoindustryhasdevelopedtrackandtracetechnologywhichallowsenforcementtoeasilyidentifylegitimatetobaccoanditssource.

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Collaborative working:protocolsareinplaceforHMRCandthetobaccoindustrytomeet,todiscussandagreeonappropriateactionaroundareastotackletheillicitmarket.TheTMAworkswiththeScottishAnti-IllicitTradeGroupandtheNorthernIrelandIntellectualPropertyCrimeGroupandcoordinatestheTobaccoSecurityForumtosupporttheworkofNationalBusinessCrimeSolutions.Thesegroupsshareinsighttoaidtheworkofenforcementagencies.ThedevelopmentoftheNationalAnti-IllicitTradegroupwillbringtogetheracross-sectionoflawenforcementtofocusonspecificsectors.

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NI

NorthEast

NorthWest

Wales

EastMidlands

WestMidlands

Southwest

Southeast

London

EastofEngland

YorkshireandHumber

Survey total = 12,065ThesurveysampleisrepresentativeoftheUKpopulationbygovernmentofficeregion.

Insight:theTMA’smembercompaniescollectandanalysealargeamountofdataonthetobaccomarket,includingadetailedpictureofthedynamicsofnon-UKdutypaid(NUKDP)consumption.TheTMA’ssurveyof12,000adultsmokersprovidesuniqueinsightintoadultsmokerbehaviour,awarenessandattitudestowardstheillegalmarket.

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Mobilising support:theTMAanditsmembercompaniesconductregularcampaignsacrossnational,regionalandtrademediainordertoraiseawarenessoftheimpactofillegaltobaccoandtoencouragereporting.Thebreadthofindustrycampaignswithastrongcalltoactionhasplayedanimportantroleindeliveringactionableintelligencetolawenforcement.TMAlaunchedcampaignstargetingpassengerstravellingthroughmajornationalandregionalairportsaswellastheUK’slargestferryport.In2017thecampaignwasextendedtocoverspecificroutesfromEasternEurope.

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BATOverthepasttwelvemonths,BritishAmericanTobacco,UKandIreland,hasbeenworkingtohighlighttheissueofillicittradewithretailersacrossthecountry.AspartofourTradeengagementprogramme,wehaveworkedtohighlightandaddressthespreadofillicittradeanditsnegativeimpactonlegitimatebusinesses,retailersandconsumers.Aswellasdirectcommunicationwithindividualretailerswehaveundertakenanumberofroundtableeventsacrossthecountry.Theseeventsaimtodemonstrateandtobuildanunderstandingamongtheretailcommunityofhowwecanbestaddressthechallengeofillicittrade.

Overthecomingtwelvemonths,BATintendstolaunchanewAnti-IllicitTradeprogrammewhichwillseektotargetbothretailersandconsumersincommunitieswithhighlevelsofillicittradeandworktospecificallyhighlightthedangersoftheblackmarket.Thiswillbesupportedbyatargetedmediacampaign.

Imperial Tobacco LtdIn2017ImperialhasbeeninvolvedintwonationwidecampaignswithUKtradeassociations,theNationalFederationofRetailNewsagents(NFRN)andtheFederationofWholesaleDistributors(FWD)toraisetheprofileofouranti-illicittradeactivities.Inthetradepress,Imperialhasfocusedonthemesincludingacrackdownonsellingcounterfeittobaccooversocialmediaandtheincreasinguseofsnifferdogstohelpsniffoutillicittraders.Internally,thefocusisondistributingassetsfromtheSuspectit?Reportit!campaigntoassistImperialcolleaguesinotherkeyEuropeanmarkets(includingFranceandPoland)underthreatfromillegaltobacco.

JTIJTI’slongestablishedandsuccessfulDon’tBeTemptedcampaignmovedtoLondoninMay(2017),highlightingthescaleofillegaltobaccobeingsoldinretailoutletsinthecapital.Testpurchasingundertakenin400outletsshowedthat50ofthemweresellingillegaltobacco.Thisshockingfindingresultedin18newspaperarticles,sevenradioitemsandonetelevisioninterview.Oneofthemostpositiveoutcomesofthecampaignwasthereactionofthepublicwhichmanifesteditselfina12-foldincreaseinthenumberofcallstoCrimestoppersrelatedtoillegaltobaccosales.AlltheinformationfromthetestpurchaseshasbeenmadeavailabletotherelevantTradingStandardsdepartments.

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Mobilising support: TMA member case studies

DODGY CIGARETTES AND TOBACCO BRING CRIME INTO YOUR COMMUNITY

If you have any information on those selling illegal tobacco contact the independent charity Crimestoppers anonymously on 0800 555 111 or through the Anonymous Online Form at www.crimestoppers-uk.org.

Alternatively contact HMRC’s Fraud Hotline on 0800 788 887.

JTI Anti Illegal Tobacco Campaign Ad 250x114mm.indd 1 10/05/2017 12:58

In addition to the issues raised through HMRC’s sanctions consultation, the Government should also:

• reviewtheLocalGovernmentDeclarationonTobaccoControlanditsimpactontacklingillicittrade

• ensurethatonlineplatformssuchassocialmediawebsitestakegreaterresponsibilityforthepromotionorsaleofillegaltobaccoviatheirplatforms

• introducefixedlimitsonpersonalimportsoftobaccointotheUKfromEUcountries

• makeitmandatoryforlandlordstoevicttenantswhoarecaughttradinginillegaltobacco.

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Industry supports Government’s approachSanctions:theTMAhaslongcalledformoreeffectivesanctionsagainstthecriminalswhotradeinillegaltobaccoandhassetoutrecommendationsinresponsetoHMRC’sconsultationonthisissue.Manyofthemeasuresoutlinedinthe2017consultationreceivedstrongsupportfromadultsmokers.

Risingfinancialpenaltiesforrepeatoffenders

Onthespotfinesforthosesellingillegaltobacco

Makelandownersandlandlordsmoreresponsibleforillegalgoodssoldontheirpremises

Makeiteasiertonameandshamepeopleorcompaniesthatillegallyevadetobaccotax

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Challenges remain

Practical solutions to help tackle the illegal trade

Experience has shown that action on this front is most effective when it is coordinated, involves the industry and all levels of law enforcement.

However,seriousoperationalandstructuralbarriersstillremain,mostnotably,atthelocallevelaroundtherole,effectivenessandcapacityofTradingStandardsandtheimpactoftheLocalGovernmentDeclarationonTobaccoControl(LGDTC),whichattimeshasbeenmisinterpretedbysomeTradingStandardsdepartments,resultingindisengagementwiththeindustry.

TMAmembercompaniesworkcloselywiththoseTradingStandardsdepartmentsthatarewillingtoengageonanumberofoperationalissuesthroughtheworkofbrandenforcementofficers,forexample,inauthenticatingseizedgoodsandprovidingintelligenceanddataforprosecutions.It’s vital that all local authorities take action to ensure engagement is allowed in an open and transparent manner, to effectively tackle the illicit tobacco trade.

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