Brendan Griffin (Kerry South, Fine Gael)
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I am grateful for the opportunity to raise this matter, which affects the areas of health and public finances, as well as enterprise because it also affects jobs. Last Wednesday, I hosted a briefing session in the audio-visual room at which representatives from Retailers Against Smuggling, RAS, addressed Oireachtas Members on this important matter. Retailers Against Smuggling is a national group, representing Irish tobacco retailers, which was set up in 2009 to help combat the growing illicit trade in tobacco in Ireland. Its establishment in 2009 indicates this problem is not new but has been extant for quite some time. Moreover, the fact the aforementioned group has 3,000 members also demonstrates this is quite a large problem that is not confined to a small group but is nationwide and growing.

According to Retailers Against Smuggling, based on 2010 figures the illicit trade in tobacco is costing Ireland's retailers €575 million per annum and the Exchequer €460 million from the avoidance of tobacco duty each year. Although budgetary adjustments of between €3.6 billion and €4 billion each year are being contemplated at present, this figure constitutes more than 10% of the amount under discussion. An enormous amount of money is being lost to the Exchequer as a result of tobacco smuggling. Consequently, this problem must be tackled and it will take a multi-departmental approach that must involve the Departments of Justice and Equality; Health; Jobs, Enterprise and Innovation; and Finance.

At present, the maximum fine for cigarette smuggling in Ireland is just over €126,000, but the average fine imposed in the second quarter of 2011 was €1,468. This sums up the current approach to the problem, which is that it is not being taken seriously. A shocking statistic put forward by RAS is that almost one quarter, 23%, of tobacco products consumed in Ireland in 2010 were not duty paid. One in four tobacco products consumed had no duty paid, even though each tobacco product consumed will impose a cost on the taxpayer through the health service. This is not good enough. Last May, Europol reported the reason Ireland in particular was one of the centres in which cigarette smuggling is a major problem is because it has high prices for cigarettes and low penalties. This must be addressed and penalties form the key to the problem.

This problem affects retailers and distributors. It has an effect on local economies, on the national economy and, as I mentioned earlier, on the public finances in particular. Moreover, vulnerable young people under the age of 18 are also victims because they are able to buy cigarettes from those who sell them on the streets. The problem also is that it is not just regular cigarettes that are being sold but counterfeit ones, and God only knows what goes into them. According to RAS, four out of five tobacco products that are sold illegally in Ireland are counterfeit. This is both a huge problem and a triple-edged sword, so to speak, in that the Exchequer is losing revenue, the health service will not get that revenue and the products being consumed are far worse than those which are regulated and on the market. It is time to wake up to this issue and tackle it straight-on.

Members must ensure there are harsher penalties for smugglers and we must introduce a minimum fine for smuggling. Although the Customs and Excise officers are doing an excellent job in protecting the country from the importation of illegal substances, they only have two scanners in the ports. Another one is needed and European Union funding is available, under the Hercule II fund, to buy an additional scanner for the ports to make it more difficult for smugglers to bring in those products Fines for selling illicit tobacco to children are also required, and greater public awareness on the dangers of consuming illegal products is badly needed.

Brian Hayes (Dublin South West, Fine Gael)
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I thank Deputy Griffin for raising this important issue and congratulate him on the initiative he took last week in bringing together colleagues to consider the issue across Departments. As he rightly observed, it is not simply an issue for Revenue but also is an issue for the Departments of Health and Justice and Equality because of its implications.

The recent Europol EU organised crime threat assessment, OCTA 2011, reported that preferred destinations for cigarette smuggling within the EU are countries with comparatively high taxes on tobacco such as the Scandinavian countries, Germany, Spain, the United Kingdom and Ireland. The level of cigarette smuggling in a given country is influenced by a variety of factors, however, of which price is only one. These factors also include geographical location, population demographics, the level of cross-border trade, price differentials with neighbouring countries and general accessibility by air, sea, road and rail. All these factors contribute to Ireland being a destination country for cigarette smuggling.

The collection of tobacco products tax and tackling the illicit trade in cigarettes and other tobacco products are the responsibility of the Revenue Commissioners. The Deputy can be assured that Revenue is mindful that this illegal trade poses serious risks to the Exchequer, the tobacco industry and retail sales of tax-paid tobacco products. Moreover, it militates against the Government's anti-smoking policies. Tackling this problem is, therefore, a key priority for Revenue. The scale of the problem is illustrated by a survey commissioned by Revenue and the Office of Tobacco Control in 2009, which estimated that 20% of the cigarettes consumed in the State have not been taxed in this jurisdiction and that approximately 14% of cigarettes are illegal product. The remaining 6% were legal cross-Border purchases. A further survey in 2010 gave similar results. Based on these data, the loss to the Exchequer from the consumption of illicit cigarettes is approximately €250 million per annum, inclusive of VAT.

Revenue employs a multifaceted approach in tackling the illicit trade based on the development and sharing of intelligence on a national, EU and international basis, participation in multi-agency investigations into criminal networks and deployment of up-to-date detection technologies, including X-ray scanners, risk analysis and profiling. Enforcement resources are deployed both at point of importation and within the country to intercept contraband product and to detect and prosecute those involved in the illegal activity. Action at the post-importation stage includes intelligence-based operations and random checks at retail outlets and other premises.

A high-level internal group, chaired at commissioner level, examines the risks associated with tobacco smuggling on an ongoing basis and has promoted a number of initiatives aimed at counteracting the illicit trade, including the adoption of a comprehensive strategy and action plan. Within that framework, important new actions have included a series of nationwide blitz-type operations, seven of which have been conducted since the middle of last year.

In terms of detection equipment, a second mobile X-ray container scanner, to augment the one first deployed in 2006, was commissioned by Revenue in January 2010 and is now fully operational. Smaller baggage or parcel scanners are deployed at all major ports, airports and postal depots. In addition to the X-ray equipment, Revenue also uses a tobacco-detection dog.

One of the scanners is based in Dublin Port, while the second is located at Rosslare Ferry Port, but both scanners are available for deployment at other ports as required. Revenue intends to maintain and increase the frequency and variety of scanner deployments at various locations throughout the country.

The success of Revenue's enforcement operations is reflected in the fact that, to date in 2011, a total of 92 million cigarettes with a retail value of approximately €39 million, as well as more than 9,500 kg of tobacco with a retail value of some €3.4 million, have been seized. Revenue will ensure that every effort continues to be made to disrupt and suppress this illegal activity.

The scale of the problem is directly related to our efforts to discourage smoking through higher taxation of tobacco products. Ireland has the highest taxes on tobacco in the EU resulting in the highest prices and consequently there are enormous profits to be made by the illegal trade in untaxed cigarettes. In that regard, additional measures to combat cigarette smuggling will be considered in the context of the 2012 finance Bill. The matter is being actively considered by the Department on foot of advice from Revenue. The fact that I have now conceded to the Deputy that this matter is likely to be addressed again in the context-----

Paudie Coffey (Waterford, Fine Gael)
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I ask the Minister of State to conclude.

Brian Hayes (Dublin South West, Fine Gael)
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-----of the 2012 finance Bill shows the intent on all our parts to counter this problem.

Brendan Griffin (Kerry South, Fine Gael)
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I thank the Minister of State for his response with the very welcome news that the 2012 finance Bill should include measures to address the problem. Those who are involved in this are not just people who are struggling, and trying to make a living and to make a few quid on the side; some very dark criminal elements are organising tobacco smuggling. As the Minister of State mentioned enormous profits are being made and I understand some criminal elements have moved entirely into the cigarette smuggling business from illegal drugs because of the profits to be made. So we are dealing with very serious criminals and I am grateful that measures will be taken to address the problem.

The Minister of State referred to the two existing scanners. However, unfortunately they can be monitored. The criminal organisations involved have people who can sit and watch the scanners being moved. Full-time scanners at our ports would be advantageous. I hope that matter can be revisited. The European Hercules fund could be used to reduce the cost to the Exchequer.

Those watching this debate or reading the Official Report, who might have consumed or purchased illegal tobacco products, should understand that they are not getting one over on the State.

Paudie Coffey (Waterford, Fine Gael)
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The Deputy should conclude.

Brendan Griffin (Kerry South, Fine Gael)
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They are doing enormous damage to the State and to ordinary working people who are losing their jobs in the retail industry. We need to address this problem collectively as a society.

Brian Hayes (Dublin South West, Fine Gael)
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The Deputy's point about the responsibility of members of the general public not to buy these illegal cigarettes is well made. Not only are they effectively defrauding taxpayers in the State, they are also putting their own health at further risk because they are consuming products which have not been verified in the normal way.

The average price of a packet of cigarettes here is €8.65, whereas in Hungary it is €2.06, meaning that smokers in Ireland are paying top-dollar. Raising tax on tobacco products further would simply encourage the illicit trade to which the Deputy refers.

Paudie Coffey (Waterford, Fine Gael)
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I must call time.

Brian Hayes (Dublin South West, Fine Gael)
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We have already used funding from the Hercules programme for one or two of the scanners - we will consider the matter again. As they cost €3 million to purchase and €320,000 a year to maintain, obviously it is a cost issue. I assure the Deputy that Revenue is on top of the problem and is doing everything it can to address it.