The House of Commons Public Accounts Committee said Customs estimated £3.5bn in duty and VAT receipts - the equivalent of 1p on the basic rate of income tax - had been lost through smuggling of all tobacco products in 2001/2002.
Link: Customs takes on cigarette fraudsters
And the all-party Westminster financial watchdog accused Imperial Tobacco Group of hindering government efforts to stop smuggling of its cigarettes back into the UK.
The MPs accused Imperial of ‘fobbing off’ Customs and Excise investigations into why it exported large volumes of cigarettes to places like Andorra and Kaliningrad ‘when they must have known that the cigarettes could not have possibly been for those domestic markets’.
Most of the cigarettes produced in the UK are made by Imperial, Gallagher Groups PLC and British American Tobacco PLC with about 50% made by Imperial.
In 2001/2002 the estimated loss of tax through smuggling of Imperial’s two main brands was £1.4bn, the committee found.
The MPs also called for Customs to have ‘unfettered access’ to relevant documents held by Imperial which should also be made available to the National Audit Office so it can report to parliament.
Tobacco and cigarette smuggling into the UK grew markedly in the mid-1990s following the removal of routine frontier controls between EU states.
The department of Customs and Excise admitted it had been slow to respond to that growth, and it was only in 2000 that targets to restrict and reduce the level of smuggling were set.
Imperial claimed that it had increased co-operation with Customs since the NAO investigation on which the PAC report was based.
