Pat Rabbitte (Dublin South West, Labour)
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Question 102: To ask the Minister for Finance the steps being taken to combat the illicit trade in cigarettes; if his attention has been drawn to the fact that it is estimated that the loss in revenue to the Exchequer is of the order of €500 million annually; and if he will make a statement on the matter. [31170/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am informed by the Revenue Commissioners who are responsible for the collection of tobacco products tax and tackling the illicit trade in cigarettes and tobacco products that their strategy for tackling this illicit trade is focussed both on intercepting and seizing illicit consignments at the point of importation and also on carrying out checks at retail outlets, markets and commercial premises etc. This is achieved through a combination of freight intelligence, risk profiling and scanning in the case of smuggling in maritime freight. In the case of passengers arriving by air from high risk source countries where cheap cigarettes are freely available, targeting smugglers is carried out on the basis of risk profiling by Revenue Officers based at all the main airports. Where feasible, large consignments are placed under surveillance and allowed to proceed to their destination under a controlled delivery with a view to identifying those responsible for the importation. These operations are normally carried out on a multi-agency basis with the assistance of the Gardaí.

Illicit cigarettes that escape detection at the point of importation are also seized inland in the course of intelligence- based checks carried out at retail outlets, markets, commercial premises etc. Follow-up investigations are also conducted both at home and abroad with a view to identifying those responsible and instituting criminal proceedings where the necessary evidence has been obtained.

Revenue's strategies in these areas are under continuous review. This includes the adequacy of existing staffing resources and equipment. In this regard, taking cognisance of the interception and seizure of a number of consignments of counterfeit cigarettes bearing bogus Irish tax stamps concealed in maritime freight imported from China, it is planned to introduce a new tobacco tax stamp with added security features shortly. In addition, the purchase of a second mobile container scanner has been approved with delivery due later this year.

Revenue works closely with the individual tobacco manufacturers and the Irish Tobacco Manufacturers Advisory Committee (ITMAC) with a view to identifying illicit cigarettes on sale in the State, current trends and trading patterns. There is also close co-operation and sharing of information between Revenue and the Office of Tobacco Control (OTC). In addition, on an EU wide basis, Revenue actively co-operates and shares information with the European Anti-Fraud Office (OLAF) and with other Customs Administrations in the Member States. Furthermore, Ireland, along with the other Member States, has also ratified two international agreements concluded by OLAF with global cigarette manufacturers, Philip Morris International and Japan Tobacco International, with a view to tackling the illicit trade in counterfeit and contraband cigarettes.

As regards the estimated cost to the Exchequer mentioned, Revenue has previously acknowledged the difficulty in determining the potential tax loss as a result of the illicit tobacco trade because of the multiple factors that have to be taken into account. For instance, a drop in the overall tax take may be partly due to a decline in smoking levels as a result of the various anti-smoking campaigns. Increased legal purchase of duty paid cigarettes in other EU Member States for personal use is also a factor, particularly in the context of low cost air travel and more frequent foreign holidays. This, of course is perfectly legal in the context of the EU principle of freedom of movement. Consequently the reliable information available, which Revenue can analyse, is mainly the quantity of contraband cigarettes intercepted and seized by Customs, the revenue at risk on those cigarettes and the volumes of cigarettes on which duty is collected each year.

Details of the above for each of the past three years are as follows:

As regards the estimated cost to the Exchequer, Revenue very tentatively estimate that about 20% of cigarettes consumed in Ireland may be untaxed. This is in line with previous trade estimates, equating to a tax loss of approx. €380m. However, it should be noted that this estimate includes legal cross-border shopping purchases for personal consumption along with smuggled counterfeit and contraband cigarettes.