THREE HMRC INITIATIVES to tackle illicit tobacco smuggling have "produced nothing" since 2010, according to a Public Accounts Committee report of session.
HMRC estimates that duty not paid on tobacco smoked in the UK in 2010/11 resulted in revenue losses of around £1.9bn, while tobacco duties generated £9.9bn of revenue in 2011/12.
According to the committee, HMRC appears to have used some of the funding from the 2010 Spending Review, earmarked for investment in new initiatives to tackle tobacco smuggling.
HMRC was also required to find efficiency savings so total spending on HMRC's tobacco strategy in 2011/12 rose by only £3m to £68.9m and fell to £67.4m in 2012/13. HMRC claims to have made efficiency savings but admitted, for example, that some of the money it earmarked for new initiatives actually funded six overseas intelligence officers already in post.
Committee chair and Labour MP Margaret Hodge (pictured) said: "There is evidence that HMRC has made ground in tackling tobacco smuggling, with estimates indicating a drop for illicit tobacco products between 2000-01 and 2010-11. The expansion of the Department's network of overseas officers has been particularly successful.
"What concerns us is that three of the five HMRC initiatives to further tackle smuggling funded from the 2010 Spending Review had produced nothing by March 2013. The Department and Border Force have been painfully slow in taking forward new proposals to improve performance. That in turn means they missed their target for extra revenue by £200m in two years."
A spokesman for HMRC said:"Since 2000 we have more than halved the size of the illicit market in cigarettes; in the last two years alone, nearly 3.6bn illicit cigarettes and over 1000 tonnes of hand-rolling tobacco have been seized resulting in 432 prosecutions.
"Relentlessly disrupting criminal businesses is at the heart of HMRC's strategy to clamp down on this illicit trade. The tobacco smuggling gangs are constantly adapting to the huge downward pressure HMRC puts them under. This pressure has caused the long term decline of this illegal trade.
"Additional investment has been made by this government to tackle tobacco smuggling, and our officers posted overseas have made a significant contribution to the drive against smuggling as the PAC recognises. The government is reinvesting nearly £1bn in HMRC to continue the fight tackling evasion, fraud and avoidance. "
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