Alcohol, cigarettes and diesel black markets cost us £28.5 billion!

by John Fitzsimons on 10 April 2012  |  16 comments
Tweet

Illicit trade in alcohol, diesel and cigarettes is costing the taxman a fortune.

Black markets in cigarettes, hand rolling tobacco, spirits, beer and diesel have cost the nation an incredible £28.5 billion in lost tax revenue.

That’s according to new research from lobby group The TaxPayers’ Alliance, covering the tax years 2005/06 to 2009/10.

And the group suggests that, had HM Revenue & Customs managed to plug this tax gap, it would have been able to fund a 1p cut in the basic rate of income tax.

The biggest illicit market is the trade of cigarettes. This market alone represents £12.2 billion of lost tax revenue, and is the equivalent of 16% of the entire market.  Next comes diesel, which is worth £6.4 billion, and then hand rolling tobacco, worth £4.5 billion.

Incredibly, the black market for hand rolled tobacco represents half of the entire market!

It’s likely to get worse

In terms of tobacco and alcohol black markets, the group believes this situation is likely to be exacerbated by higher duties and prices, such as the Government’s suggestion for minimum unit prices for alcohol.

There is also the suggestion that introducing plain packaging for cigarettes – in an attempt to make it less glamorous – will make things worse as it will become harder for shopkeepers to discern between illicit packs and legitimate ones.

So what do you think the taxman should do? How can it reduce the black markets for these goods?

More on tax:

Tax and benefit changes for 2012/13

Where council tax is rising and falling next year

How to make sure you’re on the right tax code

Six easy ways to pay less tax

Things