I am having a field day with this IFS report 'A Survey of the UK tax system' and am now moving on to tobacco taxation and smuggling.
Is there a link? My gut feel (no - that feeling is a need for food and another cup of tea - ed), is that there should be... the higher taxes go up on tobacco products - the more smuggling is bound to occur. As an aside I would argue that as the price goes up legal consumption will go down as people give up due to the expense (price signals - economics ed).
Research shows that tobacco smuggling accounts for approx 46% of all hand rolled tobacco and approx 10% of all cigarettes consumed in the UK - see page 1 of this report by ASH. Just wonder how accurate their figures are (You can see the ASH investigators targetting smokers with free tobacco products if they agree to take part in an anonymous survey - ed) What ASH conclude is that £1.1-3 bn is lost per year to the Chancellor over recent years due to smuggling.
This figure appears to be in the right arena, as numbers given by the Tobacco Manufacturers Association (TMA) here show. What is very noticeable is that the value of total smuggled tobacco, i.e. potential revenue lost to HMRC, according to the TMA, has been going down in value terms since their figures began in the 2000-1 time frame (or there estimate of the illegal trade is off the mark? - ed)
Wonderful (no - ed) report by the ONS for 2008-9 here gives a thorough investigation into smoking, who, what, why etc and another more wide ranging one covering general household expenditure including smoking here.
However, the TMA is very worried about the rise of smuggling as is shown by these slides discussed at the Anti-Illicit Trade Summit of 2011 and also in this talk. The TMA's beef (horse meat - ed) may, to my mind, be more that a large proportion of the smuggled goods are counterfeit, up to 13% according to their latest estimate. Which they don't make any money from and will damage their brands!
More Facts and Figures
The real increase in taxes on cigarettes over the past 30 years is enormous over 250%.
The tax take on tobacco related products is in the region of £11bn and makes up around 78% of the price of a packet of 20 cigarettes in 2012.
Is there a link? My gut feel (no - that feeling is a need for food and another cup of tea - ed), is that there should be... the higher taxes go up on tobacco products - the more smuggling is bound to occur. As an aside I would argue that as the price goes up legal consumption will go down as people give up due to the expense (price signals - economics ed).
Research shows that tobacco smuggling accounts for approx 46% of all hand rolled tobacco and approx 10% of all cigarettes consumed in the UK - see page 1 of this report by ASH. Just wonder how accurate their figures are (You can see the ASH investigators targetting smokers with free tobacco products if they agree to take part in an anonymous survey - ed) What ASH conclude is that £1.1-3 bn is lost per year to the Chancellor over recent years due to smuggling.
This figure appears to be in the right arena, as numbers given by the Tobacco Manufacturers Association (TMA) here show. What is very noticeable is that the value of total smuggled tobacco, i.e. potential revenue lost to HMRC, according to the TMA, has been going down in value terms since their figures began in the 2000-1 time frame (or there estimate of the illegal trade is off the mark? - ed)
Wonderful (no - ed) report by the ONS for 2008-9 here gives a thorough investigation into smoking, who, what, why etc and another more wide ranging one covering general household expenditure including smoking here.
However, the TMA is very worried about the rise of smuggling as is shown by these slides discussed at the Anti-Illicit Trade Summit of 2011 and also in this talk. The TMA's beef (horse meat - ed) may, to my mind, be more that a large proportion of the smuggled goods are counterfeit, up to 13% according to their latest estimate. Which they don't make any money from and will damage their brands!
I was hoping to nail the fact that as the price goes up, so does smuggling, but I cannot find any figures that satisfy that hypothesis. All I can say is that hand-rolled tobacco consumption has increased significantly as cigarette consumption has gone down.
More Facts and Figures
The real increase in taxes on cigarettes over the past 30 years is enormous over 250%.
The tax take on tobacco related products is in the region of £11bn and makes up around 78% of the price of a packet of 20 cigarettes in 2012.
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