Cigarette Smuggling in the UK (fwd)

[Robert Weissman <rob@essential.org>]

The Guardian

'Freddie Laker got a knighthood for
providing cheap flights. I don't suppose I'll
get one for selling cheap fags'

Cigarette smuggling is burning a £5bn hole in the
government's pocket. As one bootlegger is fined
£10m, Nick Hopkins follows the illicit trail

Smoking: special report

Friday December 17, 1999

Dave West has a dilemma. He has lived in Belgium for 17 years
and hates it. "Weak socialist governments, high taxes, it is an
uncivilised place," he explains in a voice rich with Essex intent.
 He wants to move back to the UK - "I'm desperate" - but says
 he can't. Not just yet, anyway.

 "It is very, very hard to walk away from the goose that is laying
 all these golden eggs. Sometimes I wish Gordon Brown would
 save me from making all this money. I could go home and spend
 my ill-gotten gains."

 West, a 55-year-old former barrow boy from Romford, has
 become a millionaire from cigarette smuggling. That is not to
 say he is a criminal or that he has been involved in illegal
 activities. He isn't and he hasn't. But he is making a fortune by
 exploiting the huge difference between the price of cigarettes in
 this country and abroad.

 At his cash and carry warehouses, EastEnders, just inside the
 Belgium border at Veurne and at Adinkerke near Calais, he sells
 cartons of 200 cigarettes for as little as £19, half the UK retail
 price.

 In Belgium, cigarettes are not subject to the same whopping
 duties as in Britain, so the booze cruisers who cram on to the
 ferries at Dover hardly need encouragement to make the short
 trip across the border once they are in France.

 West is in no doubt where his cigarettes end up being smoked.
 "In Britain, of course. Most, if not all of them."

 Every time the chancellor puts up the tariff (there is an
 automatic annual increase of inflation plus 5%), West rubs his
 hands, thanks heaven, and delays his move across the Channel
 just a little longer.

 He is not the only one.

 Cigarette smuggling has increased relentlessly since the
 introduction of the Single European Market in 1993 but nobody
 realised quite how enormous the illicit trade had become until
 two years ago, when proper assessments first began.

 Technically, you can bring in as many cigarettes as you like
 from Europe so long as they are for personal consumption.
 Some bootlegging was anticipated, but not on this scale.

 Seventeen billion cigarettes (20% of the market) will have been
 smuggled into the UK and bootlegged this year. Eighty per cent
 of the hand-rolled tobacco smoked in this country has been
 smuggled.

 The treasury believes it has been cheated out of £3.5bn in 1999,
 and almost £5bn since 1997.

 The vast majority of the 8,300 tobacconists who have gone out
 of business this decade could argue they have been cheated out
 of their businesses too. Smuggling has cost them their
 livelihoods.

 Although it began as a "scam in a Transit van" six years ago,
 smuggling has recently come into the sphere of organised
 crime. On Wednesday Ellis "Tony" Martin, leader of the East
 Anglian gang 'The A-Team', was told to pay £10m as part of a
 confiscation order set by a judge at Snaresbrook crown court.

 Martin ran a £20m alcohol and cigarette smuggling ring which
 had funded an exorbitant lifestyle; he had a penchant for Savile
 Row suits and owned 17 cars. It was a brazen operation - he
 masterminded the smuggling from a cell at Weyland prison in
 Norfolk, after being jailed in 1996 for drug trafficking.

 The national criminal intelligence service has evidence that other
 underworld figures are turning away from drugs and car-ringing to
 cigarettes, orchestrating container-sized deliveries into deep sea
 ports, particularly Felixstowe and Southampton.

 The rationale is obvious: the rewards are considerable and the
 penalties for being caught much less severe. The maximum
 penalty for cigarette smuggling is seven years compared to 14
 years for drug smuggling.

 One undercover NCIS officer working in the north east was
 recently offered cartons of cigarettes for £12 each. "This was
 significant for two reasons," says a source. "First, if the dealers
 are selling cigarettes for £1.20 a packet, they must be buying
 them for 60 or 70 pence. That means they have shipped a
 massive amount of cigarettes into the country. Second, the
 contact is someone known to be up to his eyes in other sorts of
 organised crime."

 The shift from drugs to cigarettes was recognised by the
 parliamentary intelligence and security committee, chaired by
 the former Tory defence secretary Tom King.

 Urging more funding for investigators, its report published last
 month warned: "We understand that the the scale of profits that
 can be made by cigarette smuggling is comparable to drug
 smuggling and that criminals are swapping to cigarette
 smuggling as the risks and penalties are lower."

 Customs and Excise has had some success intercepting
 containers, but they fear they are arresting foot soldiers. Getting
 to the people who are controlling the trade will be much more
 difficult," says a source. "They are well organised and the
 shipments are coming in from all over the world." MI5 has been
 ordered to help, but investigations take time.

 The tobacco manufacturers association, which represents all the
 major producers, has a simple answer to the current mess. A
 packet of 20 cigarettes costs £3.88 in Britain, compared to
 £1.98 in France, £1.78 in Belgium, £1.58 in the Netherlands and
 £1.34 in Spain. More than £3 of the UK price represents tax. "If
 the government was prepared to reduce taxes on cigarettes, the
 smuggling problem would disappear," says John Carlisle, a
 former Tory MP who is spokesman for the TMA.

 "Customs officers are tearing their hair out because they can't
 cope, and the indications are that the problem will get worse
 unless the treasury is prepared to take drastic action. Gordon
 Brown has to cut the smugglers revenue at source."

 Tough talk from the TMA, but Carlisle knows the government is
 unlikely to do a U-turn. If anything, taxes on cigarettes will
 continue to go up and the disparity will grow.

 "We can but hope that the treasury will see sense," he says.
 The tobacco manufacturers are cooperating with customs
 officers, but some investigators are cynical about their motives.
 "They tend to cry crocodile tears about smuggling," says a
 Customs source. "Essentially, manufacturers want people to
 smoke their brands. They don't lose out if a container comes in.
 The treasury loses. In that sense it is a clean crime. Nobody
 gets hurt and company profits are unaffected. After all, the
 smugglers are getting their cigarettes from somewhere. They are
 not making the sticks themselves."

 The manufacturers insist they take considerable care to ensure
 they only sell to trusted distributors but argue that they cannot
 be held responsible for where the cigarettes go thereafter.

 For instance, Imperial Tobacco (which has Embassy, Lambert
 and Butler and John Player Specials within its portfolio)
 manufactures cigarettes in Nottingham and exports to the rest of
 Europe. Packets are sold to agents for between 70p and 90p
 and are sealed and stamped to identify the country they are
 being transported to. There is a customs office on site,
 overseeing the whole operation.

 The company bristles at the suggestion that they are indifferent
 to smuggling. "We take all the necessary precautions to ensure
 our cigarettes go to trusted distributors and customers," says a
 spokeswoman.

 "We are cooperating fully in the fight against smuggling. But
 however hard we try, there are always going to be criminals that
 get their hands on our product."

 West is a genuine customer, though he doesn't buy from
 Imperial direct. "I sell all the main brands and I get my stock
 from proper agents. I'm not doing anything illegal, and neither
 are they."

 This kind of loop explains how some cigarettes destined to be
 sold on mainland Europe return to the UK, but it does not
 account for the freight.

 Although there is no evidence of complicity between smugglers
 and tobacco companies manufacturing in the UK, connivance
 has been detected in other countries.

 In Italy, where cigarette smuggling has been rife since the
 second world war, prosecutors are convinced that criminals have
 dealt directly with companies.

 In the United Staes, RJR Macdonald, a subsiduary of RJR
 Nabisco, admitted last year that it had smuggled more than
 £390m worth of cigarettes into Canada from the US. It was fined
 and ordered to pay a £6m forfeiture. In another case, an
 executive of a rival US company told a court that if you can't
 beat the smugglers, you might as well join them.

 Customs and Excise officers in Britain are putting on a brave
 face, saying they are confident they can stem the tide. They
 have identified smuggling routes from Andorra and Morocco (the
 main cannabis trafficking arteries), as well as South Africa and
 Egypt, and are aware that the criminal gangs are increasingly
 looking to eastern Europe to buy cigarettes in bulk.

 They have been given extra cash to buy x-ray scanners to help
 detect shipments of tobacco at the country's major ports, and
 tougher penalties against smugglers, including enhanced
 confiscation powers, have been introduced.

 The treasury wants to introduce compulsory marking of cigarette
 and tobacco packets to show that UK duty has been paid, so
 customers know for sure whether they are buying from
 smugglers or their distributors.

 But while the difference between the price of cigarettes in the
 UK and rest of Europe exists, the incentive for smuggling will not
 diminish.

 "I am becoming a champion of lower taxes," says Dave West. "I
 want to retire to enjoy my money, but Mr Brown is making it
 very difficult for me. Freddie Laker got a knighthood for providing
 cheap flights, but I don't suppose I'll get one for selling cheap
 fags. Never mind."


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