New Research: £28.5 billion lost to black market alcohol, tobacco and diesel in just five years

April 09, 2012 1:48 AM

The TaxPayers’ Alliance (TPA) has revealed that £28.5 billion of tax revenue has been lost to the illicit market in spirits, beer, cigarettes, hand rolling tobacco and diesel between 2005-06 and 2009-10. The tax gap, detailed in an annual report from HM Revenue and Customs (HMRC), would have been more than enough to fund a 1p cut in the basic rate of Income Tax.

Click here to read the report


Analysis of HMRC's Measuring Tax Gaps from successive years shows that the taxman consistently underestimates the amount of tax revenue lost to the illicit trade each year in both alcohol and tobacco products.

The key findings of this research are:

  • At least £28.5 billion of tax revenue has been lost to the illicit market in spirits, beer, cigarettes, hand rolling tobacco and diesel between 2005-06 and 2009-10

  • Of this, £12.2 billion was lost to the illicit trade in cigarettes between 2005-06 and 2009-10

  • £6.4 billion was lost in diesel between 2005-06 and 2009-10

  • £4.5 billion was lost in hand rolling tobacco between 2005-06 and 2009-10

  • £3.2 billion was lost in beer between 2005-06 and 2009-10

  • £2.3 billion was lost in spirits between 2005-06 and 2009-10

  • The illicit trade in hand rolling tobacco makes up half of the entire market

  • Trade in illicit cigarettes makes up 16 per cent of the market

  • Trade in illicit beer makes up  14 per cent of the market

  • The trade in illicit spirits makes up 11 per cent of the entire market

  • The revenue loss to the illicit market in spirits was revised up by £440 million since the 2008 report

  • The revenue loss to the illicit market in cigarettes was revised up by £1 billion since the 2008 report

  • Losses to the illicit market for hand rolling tobacco were revised up by £140 million since the 2008 report


Click here to read the report


Matthew Sinclair, Director of the TaxPayers' Alliance, said:
"Duties on fuel, cigarettes and alcohol hit those on low and middle incomes hardest. High taxes also create fat profits for criminals. With new tax hikes, and proposals for a minimum price on alcohol, the Chancellor runs the risk of making that black market even more profitable. The revenue lost to the illicit trade could fund a small but welcome tax cut for millions of families, but instead it’s lining the pockets of those selling dodgy diesel, tobacco and booze. The Government need to give struggling taxpayers a better deal and squeeze the smugglers."
The TaxPayers’ Alliance (TPA) has revealed that £28.5 billion of tax revenue has been lost to the illicit market in spirits, beer, cigarettes, hand rolling tobacco and diesel between 2005-06 and 2009-10. The tax gap, detailed in an annual report from HM Revenue and Customs (HMRC), would have been more than enough to fund a 1p cut in the basic rate of Income Tax.

Click here to read the report


Analysis of HMRC's Measuring Tax Gaps from successive years shows that the taxman consistently underestimates the amount of tax revenue lost to the illicit trade each year in both alcohol and tobacco products.

The key findings of this research are:

  • At least £28.5 billion of tax revenue has been lost to the illicit market in spirits, beer, cigarettes, hand rolling tobacco and diesel between 2005-06 and 2009-10

  • Of this, £12.2 billion was lost to the illicit trade in cigarettes between 2005-06 and 2009-10

  • £6.4 billion was lost in diesel between 2005-06 and 2009-10

  • £4.5 billion was lost in hand rolling tobacco between 2005-06 and 2009-10

  • £3.2 billion was lost in beer between 2005-06 and 2009-10

  • £2.3 billion was lost in spirits between 2005-06 and 2009-10

  • The illicit trade in hand rolling tobacco makes up half of the entire market

  • Trade in illicit cigarettes makes up 16 per cent of the market

  • Trade in illicit beer makes up  14 per cent of the market

  • The trade in illicit spirits makes up 11 per cent of the entire market

  • The revenue loss to the illicit market in spirits was revised up by £440 million since the 2008 report

  • The revenue loss to the illicit market in cigarettes was revised up by £1 billion since the 2008 report

  • Losses to the illicit market for hand rolling tobacco were revised up by £140 million since the 2008 report


Click here to read the report


Matthew Sinclair, Director of the TaxPayers' Alliance, said:
"Duties on fuel, cigarettes and alcohol hit those on low and middle incomes hardest. High taxes also create fat profits for criminals. With new tax hikes, and proposals for a minimum price on alcohol, the Chancellor runs the risk of making that black market even more profitable. The revenue lost to the illicit trade could fund a small but welcome tax cut for millions of families, but instead it’s lining the pockets of those selling dodgy diesel, tobacco and booze. The Government need to give struggling taxpayers a better deal and squeeze the smugglers."

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