Mr. Frank Gleeson:

I welcome the opportunity to address the committee this morning. As a practising retailer, this business is close to my heart. Topaz operates more than 120 stores directly, with 1,500 employees, and we also supply 220 independent retailers. I get to see the problem every day of the week and live the issues daily. Therefore, I may be quite emotional about this presentation today.
The black market needs to be tackled, not just because of the jobs in the retail sector, as outlined by Mr. Lynam, but because of the dangers that criminal gangs pose to communities throughout the country and the huge levels of revenue that are lost to the State through illegal black market activity. This revenue is also lost to retailers and communities. Our report estimates that the State loses approximately €4 billion over a five-year period due to the black market in cigarettes, fuel, alcohol and counterfeit goods, through digital piracy and through shoplifting and theft. This is equivalent to almost 6% of PAYE collected and enriches the leaders of organised criminal gangs who do nothing to improve life in our towns and cities.

Members will see in the report details of the various categories of the black market. I will run through these briefly, starting with the illicit fuel trade, an area I am aware of on a day to day basis. Currently, fuel for off-road use is taxed at a lower rate; the price differential between the two types of diesel, green diesel and normal road diesel, is approximately 51.6 cent. Diesel used other than as auto-diesel has a special dye added to it to differentiate it from diesel to be used by motorists. The price differential acts as an incentive for criminal elements to launder the fuel and remove the dye. The illegal fuel trade is costing the Exchequer some €155 million in lost taxes every year. We estimate that approximately 12% of all diesel sold in Ireland is illegal. Much has been done to alleviate this problem, but more can be done. We need to intensify inspection levels and introduce more punitive penalties. Retail Ireland also supports a rebate scheme to farmers that has the potential to almost eliminate the problem, because once there is a cash differential, there is always a temptation for criminals to find their way around the dye problem.

There is a serious and increasing problem with illegal tobacco in Ireland. Retail Ireland supports the Government's aim of reducing smoking prevalence in the adult population and encouraging younger people not to take up the habit in the first place. However, where there is a demand for tobacco, that demand should be met through the legitimate retail chain I represent here today. Unfortunately, Irish criminal gangs are making approximately €3 million a week in selling illegal cigarettes. The price of illegal cigarettes has fallen from €4 a packet to as low as €3.20. When we compare this to the current recommended price at which legitimate retailers sell cigarettes, nearly €9 - taxation accounts for almost 80% of the price - there is a significant loss to both the Exchequer and to retailers through additional sales. People do not just buy cigarettes, but buy milk and bread and other items on which our small corner shops rely. This is a small store issue rather than a big multinational store issue. Therefore, it is important to understand that 85% of retail in Ireland is small stores and Irish owned. Therefore, this hurts communities.

We believe criminal gangs are making approximately €3 million, which is a significant windfall for them. It is estimated that the legitimate cigarette market has shrunk from 6.7 billion in 2000 to 4.3 billion cigarettes in 2010, with no commensurate drop in smoking prevalence rates. Industry sources suggest that approximately 1.8 billion of cigarettes smoked in Ireland are sourced from the black market. To combat the problem, we recommend that excise duties be frozen so that there is no further widening in the price between legal and illegal cigarettes. We also believe there should be increased investment in detecting cigarette smuggling. Crucially, the sale of any tobacco products at a market or fair should be banned. To this end, penalties available under the Casual Trading Act 1995 should be made as strict as those which exist under the Finance Acts.

While smuggled alcohol is not a significant problem in comparison with illegal fuel or tobacco, smuggled alcohol is a growing problem. Our report states that seizures of counterfeit alcohol rose from 252 litres in 2010 to 1,309 litres last year. Industry sources put the figure much higher, with some 44,276 litres of alcohol seized during 2010 in 287 different raids. The value of this was approximately €600,000 to the Exchequer. Recent seizures of alcohol in the UK showed the products contained an industrial solvent, commonly found in nail varnish remover and screen wash. Europol, the European police agency, stated that in a recent case in Turkey, 23 people died when they consumed alcohol that contained very high levels of methyl alcohol.

The issue of counterfeit goods is huge. The OECD estimates that fake goods seized by customs at borders amount to some $250 billion a year. The International Chamber of Commerce put the figure higher at $600 billion. The main fake product categories which customers knowingly purchase include clothing, 27%; watches, 15%; and perfumes, 13%. Consumers are aware that such purchases damage domestic businesses and affect Exchequer revenues. In Ireland, according to An Garda Síochána, clothing is the most common item produced and sold by counterfeiters, with individual items being produced in the Far East at a cost often as low as 50 cent per garment. I regret to have to say that poison in children's clothing is the latest risk emerging from counterfeiters. A recent investigation found formaldehyde in woollen and cotton clothes that was 500 times higher than recommended safe levels.

There are other areas of the black market we could also touch on. Digital piracy is a very big issue and I understand the committee will be hearing from Xtravision, a Retail Ireland member, at meetings in Kilkenny and Waterford next week, where the committee will learn more and can engage with Peter O'Grady-Walshe who can explain how difficult this issue is for him and his business.

Shoplifting and retail crime is another important issue. Members of the committee may have read last week about a Retail Ireland survey that showed that over 80% of Irish retailers have experienced shoplifting in the last two years. As the recession continues, crime in this area is continuing to rise. I have set out the scale of the problem. I will ask Mr. Lynam to summarise what Retail Ireland is trying to do to combat it.