Cigarette excise rise ‘will bolster organised crime gangs’, say retailers

Evidence suggests proportion of smuggled tobacco has not increased with taxes

The Department of Finance recently suggested that an excise increase might prompt more people to bring legally purchased cigarettes home from abroad. File photograph: Yasser Al-Zayyat/AFP/Getty Images

The Department of Finance recently suggested that an excise increase might prompt more people to bring legally purchased cigarettes home from abroad. File photograph: Yasser Al-Zayyat/AFP/Getty Images

 

The decision by Government to increase the cost of a packet of cigarettes by 50 cent will further increase an already growing illicit smuggling market, a group representing cigarette retailers has said.

Retailers Against Smuggling (RAS) claimed the increase would mean a packet of 20 cigarettes would now, on average, cost between €14 and €15.

Benny Gilsenan, a spokesman for RAS, said the 50 cent excise rate increase in Budget 2022 would drive demand for black market cigarettes as the price differential would be larger than ever.

He said revenues would increase for organised crime gangs and decline for legitimate traders.

Mr Gilsenan, a retailer based in Dublin’s north inner city, said he knew of black market traders selling cigarettes out of their homes and from market stalls for between €3.50 and €8 per pack.

Every time the excise rate on cigarettes was increased by the Government, legitimate stores like his passed on the increase, though black market traders were operating outside those rules.

Criminals “now have a free hand to do anything they like in regards to smuggling” and this meant they could maintain much lower prices, thus significantly undercutting shops like his.

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“We fully expect that this latest excise increase will drive more Irish smokers to the black market with criminal gangs exploiting the demand for illicit tobacco products. This will inevitably lead to a growth in large-scale smuggling activity ,” he said.

Garda sources said excise duty on cigarettes had increased almost every year and they doubted if another increase would have any noticeable impact on smuggling levels.

‘Historic problem’

“We have a historic problem with smuggling and that’s because the IRA developed the cigarettes market and some of those people are still involved in it,” said one officer.

Other Garda sources believe if the latest excise duty increase resulted in some packets of cigarettes reaching €15 for the first time it might encourage some smokers to switch to black market alternatives.

However, it was unlikely that would have a significant impact on an already well established smuggling trade.

Last month, a Department of Finance paper warned increasing excise on cigarettes may result in a loss of revenue for the Exchequer. However, that warning from officials was based on the likelihood more smokers would buy cigarettes while abroad and bring them home rather than purchase them on the black market in the Republic.

Since 2009, Revenue and the HSE’s National Tobacco Control Office has commissioned Ipsos MRBI to conduct independent market research among smokers to determine the origin of their cigarettes.

The survey for 2019, the most recent year data is available for, showed 15 per cent of packets of cigarettes of tobacco were “illegal” while a further nine per cent were “found to be legal non-Irish duty paid”.

Almost all of the “illegal” cigarettes were “normal commercial brands of cigarettes bought duty paid or duty free outside the country and smuggled” into the Republic. The “non-Irish duty” cigarettes were “legally purchased in another jurisdiction and brought into Ireland by the smoker”.

While excise on cigarettes has been increasing almost every year, the annual research shows those increases are not leading to a growing cigarettes black market.

The number of “illegal” cigarettes held by Irish smokes, for example, has been between 10 per cent 16 per cent in the period 2009 to 2019. The highest rate of illegal cigarettes held by smokers in Ireland was recorded in 2009, at 16 per cent. That rate fell to 10 per cent by 2016 despite consistent increases in excise during that period.

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