Apparently this is the first time that HMRC has imposed a penalty on a firm for supplying to areas that are a "high risk" for smuggling. Cigarettes are significantly cheaper in Belgium, compared with retail prices in the UK, because of lower taxes. Thus, in HMRC's view, there is a risk that the cheap fags will be "re-imported" (smuggled) back into the UK (doubtless via Dover - either in a small boat or on ferry).
It is an interesting fine, given that BAT is not in the business of smuggling and is not paid to act as a law enforcement agency. However, an 8 year old amendment to the Tobacco Products Duties Act of 1979 entitles HMRC to impose a fine if a manufacturer is deemed to have failed in its duty not to facilitate smuggling. The maximum penalty is £5m.
Unsurprisingly, BAT said it was appealing against the "unjustified" fine.
The company was quoted by the BBC:
"We are a business not a law enforcement agency".This is the first time a fine of this nature has been handed out by HMRC.
HMRC said at the time:
"The supply-chain legislation enables HMRC to work with industry to restrict the volume of genuine products available to smugglers.By happenstance there have been a number of comments on this site recently touching on the issue of cigarette smuggling, and the possibility that some confiscated cigarettes have found their way back into the market place (Dover's pubs and corner shops etc) thanks to "security issues" within the warehouse in which the confiscated fags are stored (eg this thread).
Sanctions are a last resort and only applied where there is evidence that a manufacturer is failing to comply with its legal obligations."
I confess to knowing very little about the procedures relating to confiscated fags etc. However, a cursory glance on the net indicates that HMRC has a list of organisations that act as Customs agents and that there are organisations (eg Smartwater) that can provide "chemical tracers" that will identify items (such as cigarettes) that have illegally re emerged into the market from a secure warehouse.
I assume, if cigarettes have illegally re entered the market, there will be sufficient CCTV footage from the warehouse to identify those who took them. I also assume that those responsible will be apprehended and brought to trial.
Tax does have to be taxing.
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