Black Market In Cigarettes Flourishing

 

As per Guido:

"The illegal tobacco trade is rife in Britain. This week a Romford shop was shuttered for after officers uncovered an £8,000 stash, traders in Grimsby were found with £12,500 worth of illicit stock and three stores in the North East selling illicit tobacco and illegal vapes have been closed down by Sunderland City Council. Nationally, Operation CeCe has stripped 33 million illegal cigarettes and 800kg of hand-rolling tobacco from shelves in the last year, with a street value of nearly £24 million…

Yet HMRC claims the black market is shrinking. Its latest estimates put the tobacco tax gap at just 14.2% in 2024/25, supposedly the latest step in a two-decade decline. HMRC’s own methodology admits the 2024/25 figures aren’t measured at all – they’re projections, produced because of incomplete data and resource constraints. The way HMRC defines the ‘tax gap’ is essentially an educated guess. It’s about as scientific as asking someone how many pints they have in a week…

There’s one easy way to work it out. Cancer Research UK estimates smokers got through 28 billion cigarettes in 2024, while HMRC records show only 14 billion cigarettes were cleared for legal sale in the same period. That means around 14 billion missing cigarettes and billions of pounds in Exchequer revenue going straight into the pockets of organised crime. A recent UCL study found 23.1% of smokers in 2025 had bought illicit cigarettes in the last six months, up from 12.2% in 2023. Test purchasing found 54% of independent retailers visited in Makerfield are selling illegal tobacco. If more than half the corner shops in Burnham’s own backyard are flogging illicit fags, HMRC’s estimate is up in smoke…"

This is what happens when governments overtax a product or service, people will use the black market! 

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Fag Smuggling

Around mid November HMRC fined British American Tobacco (BAT) £650,000 for oversupplying its products (fags) to Belgium.

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.

Sanctions are a last resort and only applied where there is evidence that a manufacturer is failing to comply with its legal obligations."

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).

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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