03 May 2002
Members of the Commons' Public Accounts Committee demanded a private hearing with Customs & Excise chair Richard Broadbent, after he told them that Imperial Tobacco had been less than forthcoming with help in preventing an annual loss of Treasury tax revenue of £3bn.
The company – which manufactures two brands that make up 50% of the tobacco smuggling market – claimed it is supplying customs officials with relevant information, but Broadbent said: 'Our view would be rather different.'
He added that, unlike other firms, Imperial had not signed a memorandum of understanding with customs, committing it to joint initiatives to stop smuggling.
But a statement issued by Imperial said that the company was set to sign a memorandum and that it had a 'long history' of assisting Customs & Excise. A spokesman for the firm added: 'Many factors that encourage smuggling are outside our control – such as excise duty and the resources available to customs.'
Earlier, MPs had raised concerns that UK sources are exporting cigarettes to countries such as Moldova and Afghanistan, where gangs then smuggle them back via France or Eastern Europe.
The Treasury collects 22% of the retail price of cigarettes in tax – around £7.8bn a year. But customs officials estimate that one in five cigarettes smoked in the UK has been brought in illegally.
Broadbent said that, following a £209m injection of government cash, Britain was using sophisticated intelligence and equipment to prevent the problem escalating and that 43 organised gangs of smugglers had been broken up in the past year.
'I'm reasonably confident that we're going some way towards stabilising this market,' he added.
He later revealed that the total figure for lost tax revenue is expected to fall by 2004.
Auditor general Sir John Bourn, the head of the National Audit Office, raised concerns that the tax black hole may be bigger than estimated.
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