Illicit Tobacco Trade Endemic in Scotland

Nationwide research conducted by former Scotland Yard detective chief inspector Will O’Reilly has uncovered an endemic illicit tobacco trade operating in Scotland just as the Government have committed to introduce plain packaging for tobacco products.

Public Health Minister Michael Matheson recently reaffirmed the Scottish Government’s commitment to introduce plain packaging by legislating in the 2014-15 parliamentary session following a consultation exercise planned in the New Year. However, his constituency was one of those visited by Mr O’Reilly’s team of specialist investigators and was found to have readily-available supplies of illicit tobacco.

Commenting on his findings, Mr O’Reilly said:

“My advice to the Scottish Government is that they must carefully consider implementing such legislation, as it will only lead to a rise in illicit trade at the expense of Scottish taxpayers and retailers. We have seen in Australia, where they have introduced similar legislation to that proposed by the Scottish Government, that there has been a rise in the trade of illicit tobacco.

“The more illicit tobacco hitting the market, the more access to cheap tobacco is available to children, which runs contrary to the reasoning behind introducing this legislation.

“Nearly 270 brands are currently being sold across the UK. With the introduction of plain packaging, the design scope would be reduced to one. When this has been forged once, criminals can use it for all brands. This also makes it even more difficult for consumers to spot fakes.

“We know that organised crime is behind the trade in illicit tobacco. Criminals are turning from more risky crimes to tobacco, which is a far easier market in which to operate with the potential for high profits and the current custodial sentences in place. We would urge people to be vigilant and to report any information relating to the sale of illicit tobacco. There is a lack of information coming in from the public, and complaints aren’t being heard.”

Mr O’Reilly and his team conduct intelligence led test purchases within a given area over a three day period. These are performed by law-enforcement trained and experienced test purchasers. His latest research has uncovered a booming trade in illicit whites  ̶  non-duty paid cigarettes smuggled into the UK  ̶  with brands such as Fest and Jin Ling easily obtainable throughout Scotland. Sizeable amounts of roll-your-own tobacco were also acquired.

As illicit cigarettes retail at a fraction of the cost of legal equivalents profit margins are high for criminal gangs. The illicit market is also completely unregulated. No point of sale regulation means that anyone can buy them and illicit cigarettes are often produced in unsanitary conditions; with past reports suggesting they contain anything from dead flies to human faeces.

In terms of quantity, investigators purchased more illicit tobacco products in Glasgow than anywhere else visited in the UK, not just Scotland. Illicit cigarettes were purchased for as little as £3 in some parts of the country  ̶  a fraction of the cost of legitimate products  ̶  and were found to be sold from premises as diverse as pubs, retail outlets, open-air markets, a mobile phone shop, a barber and even a second-hand clothes store.

Opponents of the Scottish Government’s plans say they would further assist the illicit trade by making counterfeiting easier and cheaper, as well as incentivising tobacco smuggling. Emerging evidence from Australia conducted by KPMG has shown a rise in the illicit tobacco market following the introduction of plain packaging last year, but the Scottish Government have brazenly ignored its findings.

Last Tuesday (November 12, 2013) at the ‘Ask the Health Secretary’ evidence session at Holyrood, Health Minister Alex Neil claimed the government were “winning the war against the illicit tobacco trade” despite official figures indicating it is on the increase throughout the UK. HMRC’s latest Tobacco Tax Gap report estimated 500 million more cigarettes and 300 million more tonnes of hand rolling tobacco were smuggled into the UK in 2012-13 compared to 2011-12, depriving HM Treasury of substantial revenue at a time of economic austerity. Around £1bn of the total £10bn revenue lost to the UK Treasury since 2009-10 can be attributed to the illicit trade in Scotland.

Large profits are to be made from organised crime groups in Scotland operating in the illicit market, which affects the margins of small retailers, funds criminality in communities and costs Scottish taxpayers considerable sums. Criminals dealing in illicit cigarettes are known to target those on low incomes, including children.

ENDS

Notes to Editors:

• Test purchases of tobacco products are normally made in each town or city over a three-day period. These are performed normally by four law-enforcement trained and experienced test purchasers. These test purchases are always intelligence-led, with the information derived from a number of sources or self-generated. In some cases, this intelligence can be quiet specific relating to a particular venue or person and in the other cases, very vague, e.g., referring to areas of the city or a number of streets.

• RYO refers to roll-your-own tobacco. A quantity of 50g can produce 100-150 rolled cigarettes.

• One carton of cigarettes consists of ten packs (each containing 20 cigarettes) and so contains 200 cigarettes.

• The average cost of a packet of cigarettes in the UK is just less than £8. (http://www.the-tma.org.uk/tma-publications-research/facts-figures/uk-cigarette-prices/)

•Ingredients contained in illicit cigarettes: http://www.dailymail.co.uk/news/article-2200633/Human-excrement-asbestos-dead-flies-The-ingredients-fake-cigarettes-Britain.html

• Counterfeit cigarettes are those that bear trademarks that have been manufactured without the permission of the trademark owner.

• Contraband cigarettes are those that enter or are sold in a market in violation of fiscal/custom laws.

• Illicit Whites refer to cigarettes that are produced in one market and are primarily smuggled into and sold in another market where they have no legal distribution.

• Will O’Reilly is a former Scotland Yard Detective Chief Inspector. Since November 2011, he has been conducting research on behalf of Philip Morris International in order to gain intelligence and understanding of the illicit trade in cigarettes across the United Kingdom and Ireland.

Philip Morris International Inc.

Philip Morris International Inc. (PMI) is the leading international tobacco company, with seven of the world’s top 15 international brands, including Marlboro, the number one cigarette brand worldwide. PMI’s products are sold in more than 180 markets. In 2012, the company held an estimated 16.3% share of the total international cigarette market outside of the U.S., or 28.8% excluding the People’s Republic of China and the United States. For more information, see www.pmi.com

 Philip Morris Limited

Philip Morris Limited, PMI’s affiliated in the UK and Ireland dates back to 1854 when Mr Philip Morris opened a tobacco shop in London’s Bond Street. Employing approximately 60 people, the company is responsible for merchandise of PMI brands including Marlboro and Chesterfield.

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