Imperial Tobacco stands accused of failing to control, and actively encouraging, tobacco smuggling by MPs of the influential Public Accounts Committee of the House of Commons. Imperial has obstructed the work of HM Customs and deliberately exported large consignments to places where there is no obvious market for them except organised crime. The report falls short of a heavy censure of Imperial and generally adopts a forward looking approach, but ASH said the historic behaviour – leading to immense losses at the Treasury and fat profits for Imperial – should not go unpunished.
“We keep coming back to the question of why Imperial exported so many billion cigarettes to places like Moldova, Kaliningrad and Afghanistan where there is no demand for them and the only obvious customers are organised Mafia that will smuggle them back into Britain – reaching kids and undermining the government’s efforts to tackle cancer and heart disease.
ASH criticised HM Customs for being slow to recognise that container fraud was driven by tobacco companies.
ASH pointed out the links between cigarette smuggling and the drug trade – money laundering.
By arguing that circumstances have changed since the PAC formulated its report, Imperial is tacitly acknowledging that it has not been co-operative and that it has been supplying rogue suppliers. The flip side of claiming credit for ceasing supplies to 30 international wholesalers is acknowledgement that the company was supplying them in the first place and has some means of controlling it.
Imperial Tobacco also claims partial credit for a reduction in cigarette smuggling of 50 percent. However, the company has spent years saying that the only way to reduce smuggling is to reduce taxation. Their new position acknowledges that they exercise a degree of control – and know more about the final markets than they have previously admitted.
Note: British American Tobacco has been under investigation for more than two years by the DTI over similar allegations.
ASH letter to the Public Accounts Committee (pdf) following the oral evidence hearing of 19 June 2002, summarising the main points.