A report published by the public accounts committee (PAC) has warned that large tobacco companies are oversupplying in European markets, in a deliberate attempt to fuel tobacco smuggling into the UK.
The study, Progress in tackling tobacco smuggling, says that smuggling tobacco across UK borders deprives the public purse of £1.9 billion.
This equates to 20% of all income from tobacco duty.
Margaret Hodge MP, chair of the PAC, praised HMRC for stepping up measures to tackle tobacco smuggling.
“There is evidence that HMRC has made ground in tackling tobacco smuggling, with estimates indicating a drop for illicit tobacco products between 2000/01 and 2010/11”, she said.
“The expansion of the department’s network of overseas officers has been particularly successful.”
She warned, however, that tobacco companies “turn a blind eye to the avoidance of UK tax by supplying more of their products to European countries than the legitimate market in those countries could possibly require.”
Hodge added that this tobacco finds its way into the UK market, saying that HMRC must do more to challenge these companies.
In July, shadow health secretary Andy Burnham attacked the government over its tobacco policies, claiming that David Cameron’s election strategist Lynton Crosby had chaired a meeting with tobacco executives to discuss blocking plans to introduce standardised cigarette packaging.