Michael Creed (Cork North West, Fine Gael)
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Question 45: To ask the Minister for Finance if he has attempted to quantify the lost revenue due to illegal tobacco smuggling; the inter-agency efforts under way to address same; if he is satisfied that the level of financial fines imposed on those convicted is a sufficient deterrent in view the profit margins involved; and if he will make a statement on the matter. [38837/11]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners, who are responsible for the collection of tobacco products tax, and for tackling the illicit trade in cigarettes and tobacco, that there is no internationally recognised method for precisely determining the amount of tax lost as a result of the illicit trade in cigarettes. However, a survey commissioned by Revenue and the Office of Tobacco Control in 2009 estimated that 20% of cigarettes consumed in the State had not been taxed in this jurisdiction. The 20% figure was further broken down as 14% illicit product and 6% legally imported by passengers arriving into the State from other jurisdictions. Revenue and the Office of Tobacco Control commissioned a similar survey in the last quarter of 2010 and the results of this latest survey show a consistency with the 2009 figures i.e. 20% of all cigarettes consumed in the State were not taxed in the State with 14% again classified as illegal product and 6% classified as legal non-Irish duty paid product. Based on an estimate of 14%, the loss to the exchequer from illicit cigarette consumption during 2010 would be in the region of €250m (excise duty + VAT). A further survey is currently underway. The Commissioners inform me that they regard the tackling of the illicit tobacco trade as a high priority area. They have established a high level internal group, chaired at Commissioner level, to examine the risks related to tobacco products tax and to oversee and optimise the detection of contraband and counterfeit tobacco products. This group has promoted a number of initiatives aimed at counteracting the illicit trade in tobacco. These include adoption of a comprehensive tobacco strategy and action plan.

The strategy employed by Revenue to tackle this illicit trade is multi-faceted. It includes ongoing analysis of the nature and extent of the problem, developing and sharing intelligence on a national, EU and international basis, ongoing review of operational policies, development of analytics and detection technologies, optimum deployment of resources at point of importation and inland, in order to intercept the contraband product and to prosecute those involved.

Interception at the point of importation is achieved through a combination of risk analysis, profiling, intelligence, and the screening of cargo, vehicles, baggage and postal packages. Revenue enforcement officers also target this illicit trade at the post-importation level by carrying out intelligence-based operations and random checks at retail outlets, markets and private and commercial premises. In July 2010, Revenue launched a series of nationwide tobacco 'blitz'-type operations, which concentrated additional Revenue resources at ports, airports and at various inland retail points, including markets for the purpose of identifying illicit tobacco products. To date, Revenue has conducted eight such national tobacco 'blitz' operations resulting in the seizure of over 34m cigarettes and 1,383 kgs of tobacco. A ninth 'blitz' operation is just completed and the seizure figures are not yet available. Revenue also carries out regular multi-agency operations, particularly in relation to large maritime importations and in checks at inland markets. Revenue also works closely with the European Anti- Fraud Office, OLAF, in their efforts at tackling the illicit sale of tobacco at an international level. Revenue also provides, and receives, intelligence from other Customs Administrations. This international cooperation, and sharing of intelligence and expertise plays an important role in combating illegal tobacco smuggling on the global scale.

With regard to the penalties available for prosecution of tobacco smuggling offences, the penalty on summary conviction for evasion of duty is

€5,000 and/or a term of imprisonment not exceeding 12 months. The penalty on indictment is up to €126,970 and/or a term of imprisonment not exceeding 5 years, or, where the value of the product concerned is greater than €250,000, up to three times the value of the products. The penalty of €126,970, which was sanctioned by the Oireachtas in the 2010 Finance Act, represents a significant increase on the previous monetary penalty of €12,695. These increased penalties are considered adequate.

In 2010, Revenue enforcement officers seized 178.3m cigarettes with a retail value of €75.3m and 3,342kgs of tobacco with a retail value of

€1.2m. To date in 2011, a total of 97.07m cigarettes with a retail value of €40.9m and 11,213kgs of tobacco with a retail value of €4.02m have been seized.

In 2011 to date, Revenue has obtained 92 convictions relating to cigarette smuggling, with fines of €128,550 imposed and 29 custodial sentences, of which 19 were suspended. There were 47 convictions relating to the sale of unstamped tobacco products with fines of €96,350 imposed and 12 custodial sentences of which 7 were suspended.

The Deputy will appreciate that the precise penalty imposed on conviction in any individual case is solely a matter for the Courts and I do not propose to make any comment in that regard.