LONDON -The U.K. government’s failure to reverse last year’s tobacco and alcohol duty hike while at the same time raising sales taxes will result in a further increase in the illicit tobacco trade in the U.K., an industry trade body said Wednesday.
The Tobacco Manufacturers’ Association, which represents cigarette makers like British American Tobacco PLC (BTI) and Imperial Tobacco PLC (IMT.LN), slammed the tax moves as “a return to the bad old days.”
When the U.K. sales tax was cut in December 2008 to 15% from 17.5%, tobacco and alcohol excise duties were raised in order to compensate for the cut. U.K. Chancellor Alistair Darling Wednesday returned sales tax to 17.5% without reversing last year’s duty rise.
The TMA said this would effectively mark the largest tax increase on tobacco products in ten years, with between 13 and 18 pence added to a pack of cigarettes.
“Not only will this increase be significantly above inflation, but it will also take place against a backdrop of rising unemployment and falling incomes, providing further incentives to criminals to illegally import and distribute cheap tobacco to adult smokers and potentially children,” said Christopher Ogden, Chief Executive of the TMA.
The TMA estimates that 24% of the U.K.’s cigarettes market and 62% of handrolling tobacco products are purchased without the payment of U.K. duty.
DECEMBER 9, 2009