UK lost £2bn in tax revenue in 2020 due to illegal tobacco trade, report finds

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Estimated total tax revenue lost from the trade in counterfeit and contraband cigarettes stood in the UK at £2 billion in 2020, a new report from KPMG has shown.

The share of counterfeit and contraband cigarettes a share of total consumption increased by 0.5 percentage points to 17.1 per cent last year, according to the annual report commissioned by Philip Morris International (PMI), with a decline in actual volume terms,

This is partly due to the 7 per cent decline in total cigarette consumption, with increased consumption of legal domestic cigarettes.

Travel restrictions as a result of the Covid-19 pandemic had a major impact on flows to and from the UK. However, counterfeit continued to increase and remained the largest non-domestic source of cigarettes in 2020. The report notes that 13 per cent of the counterfeit packs identified in the empty pack survey were in plain packaging.

The UK also recorded the second highest counterfeit volume in this year’s study, which also looked at the 27 member states of the EU, along with Norway and Switzerland.

The share of illicit cigarettes has increased by 0.5 percentage points to 7.8 per cent of total consumption in the EU.

Commenting on the report, PMI has called for public and private representatives to jointly combat illicit trade.

“It is crucial to protect consumers against counterfeits and that law enforcement, governments, and trademark owners such as ourselves in the private sectors come together as one to address and eradicate illicit trade in Europe and beyond,” said Alvise Giustiniani, Vice President, Illicit Trade Prevention at PMI.

“Eliminating illicit trade is particularly important within the context of PMI’s transformation toward a smoke-free future, and we need to continue working in partnerships to address any potential illicit trade threats, including in our novel products. Compliance to the law and effective enforcement against criminals profiting from illicit trade is an absolute must.”