Revenue Survey Poses Questions

Retailers selling tobacco products throughout the periods of 2020 and 2021 when foreign travel was either completely or significantly curtailed, were very aware that their sales had increased by an average of 12% compared to 2019.  Revenue made public statements and confirmations that the volume of products sold with Irish Tax Stamps and drawn out of bonded warehouses exceeded €150 million more than the previous accounting period.

It is therefore with genuine perplexity that we note in this year’s Annual Revenue/Office of Tobacco Control Survey (see here) that the figure of 8% of all cigarettes consumed in the country had emanated from another EU Member State, and the duties were paid on them in that country (Non-Irish Duty paid).  We are confused because the survey related to 2021 and the level of travel during that period was severely curtailed (CSO figures show 20 million arrived into Ireland in 2019,  5.4 million in 2021).  The figure for 2019 was 9% a mere 1% percentage point greater, but travel was down by 80% – something doesn’t add up!

That is – unless the respondents in the survey are now including the presence of Duty Free from the UK in the survey – we noted the increase of this market recently and see that Imperial Tobacco (See article here) have indicated an increase in Duty Free Sales – as have both Ryanair and Stena in recent communications.

Now is the time for the Irish Government to put paid to the very generous ‘Personal Allowances’ for travellers entering the State with alcohol and tobacco purchased in another EU Member State – France and Finland have both outlawed the importation of anything more than 200 cigarettes – time we acted accordingly.

Illegal cigarettes cost the state €264m in a year.  More than one in eight of all packets of cigarettes used by smokers in Ireland last year were illegal, with a sharp increase in the number of counterfeit products being sold.

The latest survey commissioned by Revenue to assess the scale of illicit tobacco products found 13% of all packs consumed by Irish smokers last year were classified as illegal.

It also estimated that 7% of all illegal cigarettes were counterfeit brands – the highest ever level since such surveys began in 2009.

The tax authorities have estimated the potential loss of revenue to the Exchequer from the sale of 22.7 million illegal cigarettes is around €264 million.

The potential tax receipts lost due to the trade of illegal tobacco products last year rose by 9% – or €22m.

Worryingly, the research found that 7% of all illegal cigarettes last year were classified as counterfeit products whereby they were manufactured without the authorisation of the rightful brand owners.

Revenue said such products were designed “to deceive consumers and to avoid paying duty.”

The vast majority of illegal cigarettes – almost 9 in every 10 packs – are classified as contraband products which have been smuggled into the Republic without duty being paid to the tax authorities.

The report also found 4% of all illegal cigarettes consumed last year were “illegal whites” – cigarettes manufactured for the sole purpose of being smuggled into and sold illegally here.

In addition to illegal tobacco products, a further 8% of cigarette packs were found to be legal but “non-Irish duty paid”, representing a further loss to the Exchequer.

The latest figures show over 6,500 seizures of illicit tobacco products were made by the authorities in Ireland last year at a value of over €67m. They represent legal cross-border purchases of cigarettes.

The survey also found that 13% of all roll-your-own tobacco packs used by Irish smokers last year were illegal – up from 12% in 2019.

Revenue said the overall findings of the latest survey suggest the numbers of both illegal and legal, non-Irish duty paid tobacco products “remain relatively stable.”

The level of illegal cigarettes reached its peak in 2009 when they constituted 16% of all packs in the Republic with an estimated loss of €285m in foregone excise and VAT.

The latest figures show over 6,500 seizures of illicit tobacco products were made by the authorities in Ireland last year at a value of over €67m.

They included 60.7 million cigarettes worth an estimated €43.5 million – up 26% on seizures recorded in 2020.

A joint investigation between Revenue and the UK Revenue and Customs authorities last year identified a major smuggling route between Germany and Ireland for illicit tobacco products which resulted in the seizure of over 1.5 million cigarettes at a business premises in Newcastle, Co Dublin.

A total of 38,246kg of tobacco seized during 2021 valued at €24.1 million represented a five-fold increase on the previous year.

In 2018, Revenue and Customs officials uncovered the first-ever, illegal cigarette manufacturing plant in the Republic when a factory capable of producing 250,000 cigarettes per hour was uncovered in a barn in Jenkinstown, Co Louth.