In the last year, HMRC managed to generate £1.63bn in extra tax as a result of investigations into ‘sin taxes’, according to figures obtained by accountancy firm UHY Hacker Young.
This represents a rise of 6 per cent compared to the year ending March 2015, indicating the taxman is clamping down even harder on the illicit trading of alcohol and cigarettes.
HMRC estimated that around 6 billion cigarettes that were consumed from 2014 to 2015 had been bought on the black market – meaning no tax had been paid – which equates to roughly 10 per cent of cigarettes sold. This is a substantial problem for HMRC, because 80 per cent of the cost of cigarettes is made up by tax.
“HMRC has been attempting to tackle the problem for some time and not without successes, but smuggling is very difficult to eliminate altogether,” said Roy Maugham, a tax partner at UHY Hacker Young.
“At points, HMRC’s efforts have gone too far. For example, they have been criticised for seizing and destroying legal imports of alcohol and tobacco intended for personal consumption.”
“At a time when HMRC is under significant political pressure to maximise the tax take, cracking down on those avoiding sin taxes generates considerable additional revenue, and is broadly popular with the public,” he continued.