UK starts consultation on illicit tobacco tax evasion

HM Revenue and Customs (HMRC) in the UK has unveiled proposals for tougher sanctions against sellers of illicit tobacco, linked to the UK’s track-and-trace scheme.

The aim is to focus on small-scale, regular offenders who play a key role in street level distribution, according to the plan. Among the proposals would be extending HMRC traceability enforcement powers to Trading Standards officers.

The changes would also give enforcement agencies the power to seize any track-and-trace compliant tobacco products when they are found alongside product that don’t comply with those requirements.

Since May 2019, every packet of cigarettes and hand rolling tobacco manufactured in, or imported into the UK, has had to be marked with a unique identifier (UID) and anti-counterfeiting security markings. Illicit products will not carry a scannable UID or genuine security markings says the HMRC.

“The timings involved with the implementation of the UK’s track and trace system for tobacco products meant it was not possible to introduce anything other than basic sanctions at launch in 2019,” says the document.

“It was decided the best approach was to fully embed this system before looking again at options for tougher sanctions.”

Other proposals are to introduce a new penalty of up to £10,000 (more than $13,000) for holding or possessing products that do not comply with the track and trace requirements

Retailers have to obtain an economic operator identifier (EOID) that must be presented before they can buy tobacco products wholesale, and another proposal is that EOID would be revoked if retailers are found with non-compliant goods.

HMRC will take comments on the document at tobacco.policy@hmrc.gov.uk until February 23, 2021, and would like to hear from representatives of businesses involved in the manufacture, distribution and sale of tobacco products, other government departments, devolved administrations, local authorities, enforcement agencies and public health groups.

The Association of Convenience Stores (ACS), which represents a lot of small tobacco retailers, said it welcomed the proposed action, noting that while illicit trading cost the UK government around £1.5bn in lost revenue in 2018/19, it also has an impact on its members.

“The illicit tobacco market damages legitimate retailers and is dangerous for consumers,” said ACS chief executive James Lowman.

“We have long called for tough action against the illicit trade, and welcome this consultation which aims to ensure that those selling illicit tobacco are stopped from doing so,” he added.

“We will also be working to advise our members to make sure that they do not unwittingly fall foul of the tough enforcement measures we need.”