Irelands Illicit Trade The 1 Billion Fraud

Exposing the damage to Irelands legitimate retailers, Revenue collection and the wider community

TOBACCO CONTROL

Is it reducing the number of smokers or increasing illicit cigarette sales?

FUEL

Is the new legislation working?

COUNTERFEIT ALCOHOL
On the rise?

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Contents 3

CONTENTS
ShelfLife conference publication Irelands Illicit Trade The 1 Billion Fraud Exposing the damage to Irelands legitimate retailers, Revenue collection and the wider community

TOBACCO
5

Legislation: Is legislation working? How tobacco control has impacted on smoking rates, smuggled tobacco and retailers Plain packaging: The impact on illicit trade

ALCOHOL
16 On the rise: The danges of counterfeit alcohol
16

SOCIETY
12 Levelling the playing field: Philip Cox from Social Protection outlines what it is doing to clamp down on the shadow economy 14 The impact on society: Why we all need to be aware of the cost illegal trading has on the country

17

FUEL
17 An industry perspective: Brian Donaldson of Maxol explains how new fuel legislation has had a positive impact on fuel laundering
17

20 Revenue: Sean Kelleher discusses fuel laundering in the border counties

ORGANISED CRIME
21 An international problem: Michael McGill from Revenues Special Investigations Unit highlights the international scale of illicit trade

Id like to welcome you to the ShelfLife illicit trade conference publication, prepared by the ShelfLife team. When ShelfLife magazine first covered the topic of the illicit trade in Ireland 18 years ago, the story got massive national media coverage and made the six oclock news. The publicity was rapidly followed by political promises of action to curb the illicit trade, more resources for the Revenue and Customs and harsher penalties for the gangsters and profiteers. Here we are, almost two decades later, and the problem is of a far greater scale. The illicit trade in diesel, tobacco and other counterfeit goods is now so strong, that legitimate forecourts, newsagents and convenience stores have had to shut down as they have lost revenue and footfall to the laundered diesel and non-duty-paid cigarettes. We must salute the hard work by our customs officials that has brought about the detection of so many diesel laundries and the regular discoveries of tobacco products that if they were to hit the streets would see many tens of millions of euros lost to the state in duty and VAT. We must congratulate the law makers on the introduction of the new returns system for fuel retailers that makes it more difficult to sell laundered diesel. However, we must ask whether public policy and common sense are beginning to diverge completely where tobacco sales are concerned. Evidence shows that tobacco smuggling into Ireland is now more lucrative than drug dealing. However, the penalties for tobacco tax evasion are only a slap on the wrist by comparison with the drug sentences. Evidence shows that there is direct competition between the legitimate, legal retailers and criminals, for tobacco consumers. Every time a retailer closes its doors, the potential is there for their customers to turn to the easily available criminal source. The proposed increase in the tobacco retailers fee is certain to reduce the number of outlets selling this legal product, and collecting duty and VAT on behalf of the state. The introduction of an annual fee, which is effectively a tax disguised as a health policy will reduce the number of legitimate retailers and play right into the hands of the profiteers and gangsters who are destroying our retail businesses. Lets have a rethink. Lets support the retailers, who do a great job and clearly work within the law. Lets help them and the wider economy by wiping out the illicit trade. Please participate fully in the conference and feel free to email me with your views or suggestions. John McDonald Publisher, ShelfLife magazine and www.shelflife.ie john@mediateam.ie

REPORT AUTHOR: Anne Brady ACTING EDITOR: Gillian Hamill DESIGNER: Liz ORourke Printed by ShelfLife

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Illicit trade in numbers

TOBACCO FUEL
1 in 4
Tobacco sales are illicit
Source: JTI Ireland

Lost to Revenue
Source: Revenue Commissioners

250 million

Lost to the exchequer

Source: IPRA

155 million

500 million
Source: ITMAC

Lost retail sales

Illegal sites in operation in 2013

Source: IPRA

120

Average price of illicit cigarettes

Source: Independent.ie, May 2013

27

Laundries closed in 2013

Source: Department of Justice and Equality

ALCOHOL
840 litres
Seized in 2013
Source: Revenue

3.5 times
More alcohol seized in 2013 than 2012
Source: Revenue

2.75 million litres

Seized between 2011 2013

Source: Department of Justice and Equality

1 Conviction in 2013
Source: Irishtimes.com, Aug, 2013

for fuel laundering in 2012

Source: Oireachtas answers July 2012

2 Convictions

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Tobacco 5

Positive actions needed

not a boost to the illicit economy
Its time the government really looked at the figures and learned from previous experiences. Legislation over the last few years hasnt added up smoker numbers have not significantly reduced, retailers however, continue to suffer at the expense of the unintended consequences
Over the past 10 years tobacco legislation has not extended far past the direct sale of tobacco. Whats more, no research has been undertaken to determine the effectiveness of these changes in legislation. Although figures from Revenue indicate a containment of illicit tobacco, studies from the Irish Tobacco Manufacturing Advisory Committee (ITMAC), Retailers Against Smuggling (RAS) and MS Intelligence have shown that the black market continues to grow with no significant drop in smoking rates. Budget 2014 introduced an additional 10 cent rise on each packet of tobacco, widening the gap once again between legal and illegal cigarettes. Of course, plain packaging continues to be pushed through without rational consideration for the consequences it may have.
Earlier this year ITMAC reported a potential loss of 500 million and 700 job losses for the retail sector, due to illicit tobacco sales

Retailer focused legislation

Since 2004 the layering of legislation at retailer level has continued. Ireland now has the highest price of cigarettes in the EU and one of the highest in the world. Tobacco branding is invisible in Ireland. Since 2006, the ban of packets of 10s, display advertising, regulation of vending machines and pictorial health warnings have been introduced. Ireland is supposedly at the forefront of tobacco legislation, yet according to a report by Eurobarometer in 2012, 29% of the population continue to smoke. The same figure was reported in 2006.

Since 2006, the ban of packets of 10s, display advertising, regulation of vending machines and pictorial health warnings have been introduced

The government continues to enforce legislation that is not having the desired effect - a decrease in smokers. Instead, its having a detrimental impact on retailers as consumers continue to smoke but dont buy from legitimate sources. Non-Irish-duty-paid tobacco already accounts for one in four sales of tobacco. Earlier this year ITMAC reported a potential loss of 500 million and 700 job losses for the retail sector. Illicit cigarettes are a problem. Its reached critical point. It is important to look at previous legislation, learn from past mistakes and take positive actions from what has worked before. Minister Reilly, who has made it a priority to remove any branding, is backing up his request for plain packaging based on a study undertaken in Australia the first and only country that has previously introduced this plain packaging law. This study is limited. The research undertaken on the possible effects of plain packs does not indicate what people will

Non-Irish-duty-paid tobacco already accounts for one in four sales of tobacco.

do should plain packaging come in. It only shows what people think they will do and so far there has been no noticeable reduction in smoking. A report released by KPMG this month indicates the most recent attempt at restrictive legislation, plain packaging, has failed. The report shows tobacco consumption overall has not declined but the consumption of illegal cigarettes has grown significantly. Nicola Roxon, former Minister for Health in Australia said from the beginning that this legislation was experimental. More time might be required to determine if plain packs will cut smoking rates in the long term but there is no doubt that it is increasing illegal sales. One counterfeit brand Manchester has had major growth from 0.3% to 1.2% in the last year.

Educating teenagers
A difficulty that could arise from this legislation is Irelands close proximity to Northern Ireland, Great Britain and the rest of Europe. Irish consumers can easily travel to buy their favourite brands or bring them back from holidays. Additionally, if brands are removed and tobacco products are viewed primarily as a commodity,

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According to a report by Eurobarometer in 2012, 29% of the population continue to smoke. The same figure was reported in 2006.

Comparison of German education and Irish education

Germany Multi-method campaign Mass communication Personal communication Internet Cooperation with stakeholders Mass media TV/Cinema Posters/Print Brochures/Flyers Website Online cessation programme Personal communication School setting Activities e.g. youth film days Teaching aids Evaluation Pre-analysis Continuing analysis including transferring customs staff to particular borders, increased training of customs officers, introduced rewards systems for officers detecting illicit product, reinforced controls along borders, developed mobile enforcement teams, modernised cigarette detector dogs and increased cooperation among sister law enforcement agencies. As a result, the illegitimate market decreased to 3.8% in 2012 from a peak of 27% in 2005 and saved taxes representing 3% of Hungarian government revenue. Actions need to be taken from proven success stories. Actions that will have positive impacts and not just boost an illicit economy that is costing the government, the retailer and the tax payer money. Legislation that sweeps problems under the carpet is not going to work. It is essential that government introduces legislation that gets to the root of the problem and stubs it out. I
*Source: The linkage between tax burden and illicit trade of excisable products: the example tobacco, Adrian Cooper, Daniel Witt, World Customs Journal, September 2012, Vol 6, No. 2

price will become the driver. A more affordable tobacco product could potentially encourage more young people to smoke. Alternative suggestions that have been made by retailer groups include a consumer awareness campaign and increasing resources for the detection of cigarette smuggling. One country where education has made significant improvements is Germany. Similar to Ireland, taxes were increased rapidly over a short time period. Cost increased by 35% between 2003 and 2005. Smoking instances remained the same but the non-duty paid product increased rapidly to reach 20% of the market by 2005.* An educational programme has been brought in across Germany called Smoke-free Classrooms. A report released by the German Federal Centre for Health Education (BZgA) in June of this year stated that adolescents in Germany (12 17) who smoke decreased from 27.5% in 2001 to 12%. Additionally there was an increase to 71.7% of adolescents that have never tried cigarettes. Thats up from 40.5% in 2001.

Ireland Inclusion in school curriculum (Junior Cert) SPHE - substance use prevention education Science Home Economics School substance abuse policy Should be addressed in schools own policy Online Quit.ie (section for young people) Spunout.ie (section on smoking) Evaluation Analysis of independent studies

Border control
In Hungary, cigarette prices increased by 80% between 2000 and 2005. Smuggled tobacco decreased the legitimate market by 30% and the illegitimate market grew to 25%. The Hungarian government took significant actions to counteract smuggling

Comparison of Ireland with other EU countries

Country Smoking rate (Eurobarometer report 2012) Ex-smokers (Eurobarometer report 2012) Change in smoking rates over 20 year period (OECD Fact book 2013) Illicit cigarette market share (Tobacco Atlas) Box of 20 premium cigarettes Measures brought in 33.2% 9.60 Smoking ban Point of sale ban Display ban Large warnings 11% 8.32 Smoking ban No point of sale ban No display ban 1% 5.20 Partial smoking ban No point of sale ban Small warnings 9.5% 5.40 Partial smoking ban No point of sale ban No display ban Small warnings 8.4% 5.00 Partial smoking ban No point of display ban No display ban Small warnings Largest school based smoking prevention programme in Europe 19% 3% 26% 28% 31% 55% 31% 43% 26% 12% Ireland 29% UK 27% Denmark 26% Netherland 24% Germany 26%

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Plain packaging A pyschologists view

Kenneth McKenzie has worked in UCD looking at the psychological mechanisms behind maladaptive decisions in health behaviours. Does he think plain packaging will work? I think it is too early to tell. The answer lies somewhere in the middle. Packaging and associations build up over a very long period of time. So while it may make packaging less attractive to six-year-olds, over time, its not going to do anything to people when they are 22. If you are addicted then packaging is irrelevant. Addicts will rob to get hold of drugs so plain packaging wont stop smokers. However, I think the amount of career smokers will drop in western countries over the next 20 years, not by a lot but a small bit. Packaging is part of a marketing mix that makes the product stand out and makes it eye catching and perhaps builds up unconscious associations in peoples heads, but thats just part of it. What you will find is a lot of those that start smoking do so for rebellious reasons. There is a case for more education

Pyschologist Kenneth McKenzie

but, because it is bad, most kids will try it. Its a taboo and once you put a taboo on something you make it desirable. If it wasnt on this it would be on other forms of drug usage non illicit drug usage. No one advertises drugs but they are growing as a problem. People do things they shouldnt and that is human history.

Boom in illicit cigarette sales in Australia

The volume of illicit manufactured cigarettes in Australia, has increased by 154% since 2012 according to a recent report by KPMG. Overall consumption of illicit product is estimated to be equivalent to 13.3% of total tobacco consumption, up from 11.8% in June 2012. This is the highest level ever recorded in Australia. This massive increase in illicit sales may have cost the Australian government AUD 1 billion. The report was commissioned by British American Tobacco Australia, Imperial Tobacco Australia Limited and Philip Morris Limited. The companies asked KPMG LLP to provide an overview of the of the legal and illicit tobacco markets in Australia, and provide an independent estimate of the size of the illicit tobacco market. Now, six months after plain packaging has been introduced, illicit sales are not only increasing but thriving. Illicit white cigarettes are being sold for 45-50% less than the cost of premium brands e.g. Marlboro. Manchester is now the largest illicit white brand in Australia, enjoying an illegal 1.2% market share. This represents significant growth, up from 0.3% the year earlier. In fact, according to the report, it has a better market share than legal brands Camel and Kent. The empty pack survey carried out in 2012 found the Manchester brand in Melbourne and Sydney only. It has now been found in 13 of the 16 main cities. Australian Customs and Border Protection Services reveal similar evidence. In 2009, 16% of the volume of seizures came from manufactured cigarettes; this grew to 47% in 2012. Cigarette prices in Australia are among the highest in the world with a premium pack costing up to AUD 15.96. This is 500% more expensive than Singapore, where, according to the empty pack survey, the majority of contraband originates. I

Driving factors
In 2010, an increase of 25% was put on cigarette excise duty. This coincided with an increase in illicit tobacco consumption. However this proportion had been steadily declining between 2010 and 2012.

A statement from Philip Morris International said:

PMI supports reasonable regulation, but we believe governments have a responsibility to ensure the laws they pass meet their stated goals, uphold the rule of law, are evaluated based on objective standards and do not lead to negative consequences, such as boosting the illegal market at

Illicit tobacco consumption as a proportion of total consumption

*Source: KPMG, Illicit Tobacco in Australia 2013

the expense of legitimate manufacturers and retailers.

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Tobacco 9

Plain and simple

packaging is important
Plain packaging of tobacco products has the potential to significantly damage the packaging industry with no proof that it will result in a reduction of smokers. Here, Mike Ridgway discusses his role as a spokesperson for the packaging industry
The Irish context

Mike Ridgway, packaging spokesperson

Irelands packaging industry is not directly involved with tobacco. Even still, from an Irish perspective, plain packaging is just as important for two reasons. Firstly, there is a significant problem with counterfeit and illicit product. Ridgway explains: Plain The size of the machines is an indicator of the scale and packaging legislation will make it investment required in print equipment for tobacco very easy for anyone to print packaging cigarette packets. Any previous The situation at present deterrents such as embossing, raised print All the decisions being made about plain or box shape will no longer be an issue for packaging have been subjective. Ridgway criminals. It is well accepted that Packaging and the UK notes: Most countries are holding back on sophisticated packaging acts as a deterrent introducing this legislation to firstly determine In the UK, the packaging industry is a very and the removal of debossing, bossing or if it has the desired or any effect on smoking important sector employing over 60,000 ridged edges is inviting more criminals to rates. But another important reason for people. There are a lot of get in on the opportunity. holding back is the current case that has been different elements that Secondly, legislation in the brought against the Australian government by make up cigarette packs; tobacco industry has, in the the World Trade Organisation (WTO). These inserts, wrapping, design, past, lead to the introduction cases can take years to go through but if print, equipment and of legislation in other Australia is found in breach of trading laws distribution, as well as industries. If this draconian there could be serious financial implications. specialist fields and skills, way of legislating is A lot of countries, such as Britain, have had says Ridgway. It is an introduced to alcohol and the foresight to wait to determine the next extensive supply chain other food items it would best step once all the elements have been that would suffer a impact severely on Irelands considered. Minister Reilly however, seems to massive blow with the packaging groups involved in want to push forward regardless of potential introduction of this the food and drinks sector. implications. Japan Tobacco International legislation. Although this could be (JTI) has already indicated it would be ready Since discussing it over viewed as a leap in thought, for a fight should its intellectual property the last two years, the legislation first introduced for rights be infringed. This fight could prove very British government has tobacco is often put in place costly for the Irish government. Billions of decided it needs more for other products. In Many different elements make compensation will have to be paid by the time to see if the legislation Australia, there are already up cigarette packs; inserts, Australian government should the WTO rule works and is waiting for calls for health warnings and wrapping, design, print, in favour of the tobacco companies. firm evidence from plain packaging to be brought equipment and distribution, as Minister Reilly is taking a big risk with Australia. This is a positive in for other products. Simon well as specialist fields and skills taxpayers money on subjective and paltry move from the packaging Chapman, a supporter of information. In the UK, its now off the political industrys stand point. Ridgway believes Australias plain packaging campaign, has agenda until 2015, says Ridgway. He adds: changing packaging does not work. He adds: spoken out in favour of graphic warnings on The Irish government should allow for a I hold a strong view that there is a serious alcohol as has the British Medical proper debate before this is pushed through, connection between smoking and health. Association. The Irish Medical Organisation we are not against regulation. What we are There is a problem, but if you want to combat has also petitioned the government to looking for is effective regulation, not just the number of smokers it should be done introduce explicit health warnings on regulation introduced for the sake of it. I through other methods like education. alcohol products.

Mike Ridgway has worked in the UK packaging industry for over 40 years. Soon after retiring from the position of managing director at Weidenhammer Packaging, the plain packaging debate began and he was asked to return in an advisory role. A number of packaging companies; Weidenhammer Packaging Group, Payne, Parkside Flexibles Group, Chesapeake, and the API Group came together to discuss the serious implications plain packaging would have for their industry. Mike Ridgway was appointed as spokesperson for the group to highlight how the sector would be impacted.

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Retailers once again the targets

The Convenience Stores and Newsagents Association (CSNA) chief executive, Vincent Jennings, is appalled at the level of disrespect the Department of Health has shown to retailers in relation to the introduction of a new tobacco licence fee
In a summary of measures in Budget 2014, the department of health listed an increase in charge for licensing of tobacco retailers with the hope of generating 5 million. This is a measure that was not previously discussed with retailers and in fact, no consultation whatsoever occurred between the retail industry and the Department of Health on the matter. The CSNAs view on the licence is that nothing should happen without consultation. chance of them never starting. If 17year-olds are not buying cigarettes legally now then theyre not going to miss them when they become 18, 19, 20 and society would be better off. The Department of Health has refused to take this measure into consideration although there are other countries and states considering such a move.

Lack of communication
The Department of Health has been quite discourteous to retailers. Although it is aware of how to make contact with the relevant organisations it has not engaged in any way in relation to this licence or the figure it thinks can be generated. Whats more, the Department of Health, which refuses to take on board retailer suggestions, should not be involved in licence and revenue decisions. It should be a matter for the Department of Finance. Why would you allow a department, that is ideologically and fundamentally opposed to the sale of tobacco, be in charge of licensing and setting the price? asks Jennings. It operates under the belief that the greatest level of pain it can extract from retailers would be good because that would further de-normalise the sale of tobacco.

Retailers being ignored

Jennings believes the lack of communication between retailers and the Department of Health is simply not acceptable. The absence of convenience store representatives being allowed to engage or being invited to engage with the Department of Health is a significant problem. I have been banging the door down looking for meetings on this matter, as others have, and there has been no give whatsoever. It is really reprehensive that any government department should choose to run the affairs of the state while ignoring genuine, legitimate and realistic requests by representatives. As retailers play by the rules and address additional legislation, they continue to battle with the criminals selling cigarettes on the black market. Smuggled product continues to be a serious issue for law abiding retailers. Yet, while retailers continue to be the focus of all Minister Reillys attention, criminals get a slap on the wrist. Talk of retailers paying extortionate licence fees is unacceptable when one considers that one seller of smuggled tobacco received a fine of only 50. We would feel that all of a sudden we are being expected to kick in amounts of money that may well be way in excess of the fines that are being accorded to some people who are smuggling products. That doesnt seem right or fair. We are law abiding. There is a 100% compliance rate according to the Office of Tobacco Control with tobacco registration. But figures show that less than 3% of fines accorded to people for the sale of cigarettes and for smuggling were ever paid. You need to have a fair system whatever youre setting up. I

Alternative suggestions
The CSNA has, on numerous occasions emphasised the fact that the organisation is not against regulation. Some of the suggestions brought forward in Tobacco Free Ireland would be considered relevant and fitting. There are a number of recommendations that are clear, such as only allowing those over 18 years to sell the product. I agree with that totally. It might cause difficulty in some small shops but it is an age controlled product. In fact, the CSNA has suggested other alternatives but to no avail. We would be of the opinion that a line should be drawn on the age limit. At the minute it is 18, in a years time it should be 19, the following year it should be 20 and then it should be 21. The 17-year-olds today should not be legally entitled to buy a packet of cigarettes until the age of 21. If you can stave off people from starting to buy cigarettes, you have a far better

CSNA chief executive, Vincent Jennings

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A fair playing field

Philip Cox, principal officer, Department of Social Protection

Philip Cox works as a principal investigation officer in the Department of Social Protection. Along with his team, he investigates fraudulent activities within the shadow economy that are having a major financial impact on sectors that are trying to legitimately trade

Illicit trade is the classic case of a cash business. Individuals dealing in cash on the black market will inevitably not be paying taxes. Invariably, they wont be paying social insurance. Their employees could also possibly be claiming job-seekers-allowance. The duplicitous behaviours of a few result in an overarching obstruction for retailers. The result is an unfair playing field. Retailers, who pay PRSI, duty tax, excise tax and ensure they are complying with legislation, are being put out of business by black market traders. As Philip Cox outlines: It has huge implications for industry. That is the importance of it; that is the context of it, that is where it fits in and that is why it needs to be policed.

How is it policed?
Social protection works closely with other agencies involved in illicit trade. The most important and pivotal relationship is with the Revenue Commissioners. Using the combined resources of both the Department of Social Protection and the Revenue Commissioners, shadow economy activity is looked at in terms of social welfare fraud and and its effects. If an individual is working in the black economy, they are not on the books and they are not being recorded, which has Revenue implications and social protection implications. Revenue and social welfare pool resources and we act as a joint inspectorate. We have years of experience in dealing with different sectors and know where the problems lie. Another source of information is from good

Revenue chairperson Josephine Feehily and Revenue commissioner Liam Irwin. The Department of Social Protection and the Revenue commissioners work together to uncover social welfare fraud

Quite frequently we receive excellent, good citizen reports from members of the public and from industry. It gives us very clear intelligence and information about people and businesses that are working in the black market or shadow economy.

citizen reports - as long as they are credible. Given the downturn in recent years, Irish society is much less tolerant about tax and social welfare non-compliance. Quite frequently we receive excellent good citizen reports from members of the public and from industry. It gives us very clear intelligence and information about people and businesses that are working in the black market or shadow economy. Thats an important source of information and intelligence - a trigger for investigation. We will look at social protection and Revenue history files and decide what action we must take on certain cases. It is very much a combined effort and it is very effective having a joint inspectorate as were not looking at the issue in isolation, were looking at it collaboratively.

with fraud and these powers are a very important element in regard to prosecutions. The Department of Social Protection does take a number of prosecutions on an annual basis. We have legislation under the Social Welfare Act which makes social welfare fraud a criminal matter. We take cases in the district court and they are prosecuted under criminal legislation. There have been a number of successes in different sectors, particularly related to cash businesses. There have been certain successes with individuals whose lifestyle and assets were not in line with someone claiming social welfare. These people tend to trade in the black economy in sectors such as renovations, gardening or plumbing.

Acceleration
What our minister has done in recent times is accelerated the rate of recovery. If somebody is on social welfare and they owe us money because they have engaged in fraudulent activities we will take that money back. The rate that we recover is now at 15% of their entitlement. Prior to that, it was much less but

Low tolerance
There is legislative provision under the Social Welfare Act for the provision of sharing information between the Department of Social Protection and Revenue. This provision is a very effective and efficient way of dealing

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Society 13

the minister has introduced quite considerable powers. Another measure the minister included in the Social Welfare Act 2013 was powers for notice of attachment. If a person has assets in a bank or is employed, money can be recovered through notice of attachment proceedings. This has been a significant development in terms of recovering money that was overpaid as a result of fraud. Considerable legislative powers have been taken to improve that situation so that increases the deterrent effect.

There have been certain successes with individuals whose lifestyle and assets were not in line with someone claiming social welfare. These people tend to trade in the black economy in sectors such as renovations, gardening or plumbing.

Improvements
The Department of Social Protection seems to be moving forward and making efforts to ensure improvements are made. The structure put in place with Revenue is important. It allows for collaborating, sharing intelligence, investigating, sharing data and getting smarter.

The way we share data now is being enhanced. Data from Revenue can give us far better intelligence and much better information about the people that may be trading illicitly and vice versa. The department also co-operates with the National Employment Rights Authority, An Garda Sochna and with local authorities. Equally important is the process of engaging with industry. The Hidden Economy

Monitoring Group (HEMG) engages with industry on a quarterly or bi-annual basis to discuss trends that are emerging. This mechanism allows for the passing on of information should any business feel they are being competed out of business by fraudulent trading. The one thing that I think is very important is the regional hidden economy groups. If you are in an industry, or a representative for an industry, a member of a Chamber of Commerce or a particular business organisation then the regional Hidden Economy Monitoring Group gives you a contact point. It provides a contact to pass on information if you are being competed out of business. Black economies move very quickly and you get a lot of emerging trends. As soon as you close down one loophole certain individuals will act opportunistically and open another. The dialogue is around what are the sectors, what are the problems, what are the issues. I

The cost of illicit trade on society

Illicit trade is a burden to society. The public may still view it as a problem for businesses or corporations that are worried about losing out on profits. However every member of society is actually affected by the shadow economy
The additional burden on taxpayers due to the criminal actions of a few is a topic not discussed enough. Tax lost to the Irish exchequer as a result of illicit tobacco alone is estimated by revenue at 250 million and by the tobacco industry at more than double that. That money would go far in the Department of Health, which has attempted to cut 666 million from the health budget this year. Similarly, laundered fuel has cost the exchequer nearly 200 million. This is money going straight into the hands of criminals. If one adds up the illicit trade in all sectors; alcohol, tobacco, fuel, medicine and so on the cost to the exchequer and society reaches 1 billion.

Reporting illicit trade

Revenue operates a smuggling hotline for the purpose of reporting illicit crime. Members of the public are encouraged to report any suspicious activity to this hotline. According to the figures, either the public are not aware of the service or are unwilling to use it. Statistics from Revenue are low on the usage of the hotline with the number of calls received through in 2010, 2011 and 2012, being 197, 97 and 137, respectively. These numbers do not correspond with the increasing levels of black market trade across the country. In 2012, Ireland experienced a growth in the percentage of non Irish duty paid products with empty tobacco pack survey figures from MS Intelligence showing a growth of 26.9% in 2011 to 28.2% in 2012.** Yet only 18 calls out of the 431 made to the freefone line during these three years directly resulted in seizures.

It has been reported that some counterfeit tobacco has been found to contain arsenic, rat droppings and far more tar and carbon monoxide than legal products

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If we look at Poland two years ago, 20 people died there from drinking illicit alcohol Michael McGill, Revenue Investigations

Less tolerance for tax evasion

Poor information has been cited as one reason and perhaps it is necessary to raise awareness about what is required to ensure these criminals are caught. However, Philip Cox from the Department of Social Protection reports he has seen an increase in recent years in the number of good citizen reports. People in Irish society these days have less tolerance for tax and non-compliance and less tolerance for social welfare abuse.

serves Dundalk town. Fortunately, it was later confirmed that no contamination of the water supply had occurred. On another occasion, two 1,000 litre containers of toxic sludge were found abandoned in South Armagh. Some of the contents had entered a nearby road gully and a minor volume of liquid waste had reached the river. Steps were quickly put into place by the Northern Ireland Environment Agency to stop any further leakage.

Health Risks
Illicitly traded tobacco and alcohol products are equally damaging to society in a number of ways. Occurring outside of the regulatory framework, these products do not follow strict health warnings or maximum tar and nicotine levels. It has been reported that counterfeit tobacco has been found to contain arsenic, rat droppings and far more tar and carbon monoxide than legal products. A report in 2009 by the World Customs Organisation*** reported a finding of counterfeit cigarettes containing mites. This container had also been hidden using aberrant methods that posed serious health risks for law enforcement officers. One example given was a barrel of titanium sponge containing toxic chlorine gas.
Revenue seized nearly four times more counterfeit alcohol in 2013 than in 2012

Increase in counterfeit alcohol

Counterfeit alcohol is considerably more dangerous, with no indication of what may have been used in its production. Revenue seized nearly four times more counterfeit alcohol in 2013 than in 2012, up to 840 litres so far this year. In August, Michael McGill from Revenues Central Investigation Branch said: If theres a high concentration of methanol, that can lead to blindness and even death if you drink enough of it. The problem is that there isnt any regulation of it and the people making it dont know what strength it is, they do not have a scientific way of doing things. If we look at Poland two years ago, 20 people died there from drinking illicit alcohol. Counterfeit alcohol with critical levels of methanol was seized in July this year after it was advertised on Facebook. Sales are focused on minors who cannot buy products legally and on those with low incomes.

Environmental impact
This signals a good change in attitude. If the damage to society caused by buying illicit tobacco or laundered fuel becomes more apparent, there may be an increase in cooperation among the general public. Louth has been a hot spot for fuel laundering over the last number of years with 10 laundering sites uncovered since 2009. As a result of these laundries, there have been considerable problems with waste by-product left behind after the laundering process. A Louth County Council spokesman recently reported that 68 incidents of illegal dumping of toxic sludge had already been recorded this year (up to September). The largest amount of waste found was 500 tonnes and there were serious concerns about its proximity to the Cavanhill water treatment plant that

People in Irish society these days have less tolerance for tax and non-compliance and less tolerance for social welfare abuse. Philip Cox, Department of Social Protection

Raise awareness
There is a demand for illicit products. Unfortunately, where there is a good distribution chain and a ready market, the rule of law is undermined and the unscrupulous thrive. Consumers look for a bargain but perhaps unwittingly pay a higher price in the long term. A campaign is required to raise awareness of the impact this is having on society but also to encourage and motivate action that will help in the prosecution of these criminals. I *Source: Response to a Parliamentary Question on 23 January 2013 ** Source: MS Intelligence. Market Survey Report. Empty discarded pack collection. Ireland Q2/4 - 2012 *** Source: Sincovich, G 2009, What is illicit trade? How it is defined and what are its components?, World Customs Organization presentation at the ITIC AntiIllicit Tobacco Trade, Brussels Conference, ITIC, Washington, DC.

Millions of euros of taxpayers money has been used to clean up toxic waste dumps

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Alcohol 15

Will we start to see a rise in spirit distilleries?

An illegal poitn distillery was uncovered by Revenue in Cavan on Friday, 1 November. The fully operational factory was located on the outskirts of Ballyconnell, Co. Cavan. Revenue has seized and detained several items from the distilling unit. A spokesperson for the Revenue said: Officers detained approximately 2,000 litres of alcohol liquid wash (used in the distilling process), 900 empty bottles, two copper cylinder tanks complete with fittings, seven 200 litre barrels, and one pump. The number of alcohol seizures has increased significantly since last year. There were 840 litres seized this year compared to 232 litres last year. However, this is the first distillery reported to be uncovered by Revenue since 2004. In 2004, there was 1,500 litres of pure alcohol seized on a farm in Cooley, Co. Louth. This distillery had the

The number of alcohol seizures has increased significantly since last year. There were 840 litres seized this year compared to 232 last year

potential to distil enough alcohol with an annual cost of approximately 3 million to the exchequer. After searching two separate premises, Revenue seized distillation equipment, printing presses, bottling and capping machinery, counterfeit labels and various brands of counterfeit vodka. Could minimum alcohol prices and higher taxes encourage a surge of illegal producers? I

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Counterfeit alcohol on the rise

There has been a significant increase in the level of counterfeit alcohol that has been made available across Ireland in the last year. It seems likely that the issue could be exacerbated with the recent increases on excise duty and the minimum pricing measures that are soon to be introduced
In July the Revenue Commissioners reported a marked increase in counterfeit alcohol that had been seized in 2013 up to 3.5 times more than in 2012. The black market tends to expand when regulation is excessive and taxation increases. There were 12 seizures in 2013 with a total of 840 litres recovered. In 2012, 232 litres were seized. The UK has had a serious issue with counterfeit alcohol for a number of years. In February 2012, The Guardian reported that there had been a five fold increase in counterfeit alcohol in 2008/2009 and 2010/2011. HM Revenue and Customs seized seven million litres of counterfeit alcohol in 2008/2009 and ten million litres in 2010/2011. One factor that may have minimised levels of counterfeit alcohol in Ireland could be the availability of cheaper alcohol in Northern Ireland.

If we look at Poland two years ago, 20 people died from drinking illicit alcohol
Michael McGill, Revenue Central Investigation Unit

Counterfeit alcohol is difficult to spot as genuine bottles are used, sourced from recycling centres and pubs.

consumers to shop over the border. The impact that alcohol prices have had on smuggling and counterfeiting in neighbouring countries is well documented. It is not unique to Ireland. Sweden (high tax) has a problem of cheaper alcohol coming in from Denmark (low tax) which has a problem with smuggled alcohol from Germany (lower tax).

Genuine bottles used for counterfeit product

Ireland no doubt has a large amount of alcohol coming into the country from the north but it is counterfeit alcohol that poses the serious risks. This alcohol is produced illegally, with vodka being the most popular spirit to counterfeit. According to Revenue this counterfeit alcohol is difficult to spot as genuine bottles are used, sourced from recycling centres and pubs. Quality control is not a matter of importance for the criminals and this alcohol could pose serious health risks. In 2011, 26 people died after consuming counterfeit alcohol in the Czech Republic. The same year 20 people died in Poland after drinking counterfeit alcohol. This alcohol is usually sourced from the industrial alcohol sector and may contain high quantities of methanol. Methanol is a toxic substance and can cause blindness and death. Alcohol prices are being kept artificially high by taxes in the hope that it will reduce per capita consumption and the harms associated with excessive drinking. However, there is the possibility that it will increase the availability of counterfeit alcohol, encourage organised crime, result in a loss of revenue for the exchequer and for legitimate businesses. I

Highest tax levels

Ireland has one of the highest tax levels in Europe on alcohol products. This has contributed to a major upsurge in consumers from the Republic of Ireland visiting Northern Ireland to buy alcohol. A decrease in excise tax of 20 cents in 2010 stabilised a rapidly declining alcohol segment as Irish customers shopped in the north. Budget 2014 has introduced a 10 cent rise in excise duty for a pint of beer and cider and the standard measure of sprits, and a 50 cent increase for a standard bottle of wine. Alcohol industry members are reported to have called this measure short-sighted and punitive saying it would encourage Year 2013 2012 2011 2010 Seizures of counterfeit alcohol 840 litres 232 litres 1309 litres 252 litres Convictions 1 7 2 6

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Fuel 17

Fuel laundering
An industry perspective
Brian Donaldson is the chief operating officer at Maxol, a family run business that has been operating for over 100 years. Here, he outlines the government measures already taken to limit Irelands trade in laundered fuels and the further work that needs to done

Brian Donaldson, chief operating officer at Maxol

What the government has is the complete circle and a full traceability scheme, from where product comes into the country and to where it eventually ends up. I would certainly commend the Revenue Commissioners for their speed of action in putting that system in place.

Toxic sludge found by Louth County Council as a result of fuel laundering in the area

Unsurprisingly, fuel laundering has had a considerable impact on the Maxol business in recent years. There has been an escalation in the number of rogue sites set up under different own-label brands right across the country. Many people have the perception that the problem of laundered fuel is focused around the border area but it goes much further. Laundered fuel has become an epidemic and is freely available across the Republic of Ireland. Launderers have brought unwelcome competition on an uneven playing field to legitimate businesses.

Republic of Ireland. According to Brian Donaldson: Laundered fuel did have a big impact on the diesel sales we were selling through our branded network. That was having an impact on the profitability of our dealers because they were obviously losing those sales. Research carried out by the Irish Petrol Retailers Association (IPRA) indicates that there are well over 100 illegal sites across Ireland. As part of this research, a value of around 155 million was put on lost revenue to the exchequer. That doesnt take into account the lost profit and sales to the legitimate trade. Of course the sellers of the laundered product were not providing any customer care to those people who later found they had problems with their vehicles. Inevitably those customers tried to come back to Maxol retailers looking for them to take care of the costs involved. This activity represents a short term gain for criminals with a long term detrimental cost to the consumer.

Revenue and new legislation

Donaldson is impressed with the work that Revenue has done to date in relation to laundered fuel. The epidemic started in 2011 and escalated quite heavily in 2012 but

Impact to Maxol
The Maxol group has a network of 227 service stations in Ireland of which 117 are in the

18 Fuel
are now building a vast amount of information which they can interrogate to target where they have specific problems.

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court process. Maybe thats something we need to look at in terms of getting it accelerated.

Is the regulation working?

This scheme was certainly needed and will enable the authorities to track the product going into a site. They can also report where it came from and the quantities involved. For those operating outside of the law this new regulation should send an important message. It gives Revenue a clear line of investigation to trace and allows it to close in on rogue traders. Certainly the progress that has been made to date is welcome but ultimately there is a lot more to do, Donaldson notes. From the second quarter this year, Maxol started seeing a big improvement in diesel sales. The company believes this can be directly attributed to the new legislation. It is now much more difficult for illegal operators to enter the trade but they havent been eliminated entirely. Many rogue sites are still trading and there is a large volume of adulterated fuel being made freely available to the general public to buy and people continue to buy it, the COO adds.

What the industry is doing

Maxol introduced the Fuels you can trust quality and traceability scheme in the Republic of Ireland a couple of years ago. This received a very positive reaction from customers, and retailers could also see that it brought in new business. Maxol is a long established brand with a long standing reputation. When we introduced the scheme it gave people further reassurance. Probably retailers that werent customers of ours before would have moved to us because they would have seen that as something very important to them, says Donaldson.

It is illegal, it is a criminal activity and where the proceeds of the sales go to is anyones guess but certainly its taking away from valuable sales and legitimate trade.

already Revenue has brought in legislation that is dealing with the issue. As an industry, through the IPRA and also the Irish Petrol Industry Association (IPIA), we have worked very closely with Revenue and it has now produced a new licensing system. Revenue has also put in place the monthly reporting of all purchases into a service station and all sales out. What the government has is the complete circle and a full traceability scheme, from where product comes into the country to where it eventually ends up. I would certainly commend the Revenue Commissioners for their speed of action in putting that system in place. They

Penalties Raising awareness

Awareness campaigns introduced by government are a popular solution for most industries. The introduction of a campaign encouraging customers to be mindful in terms of where they are buying their fuel and whether its from a legitimate retailer would be welcomed. Our message is support the legitimate trade. Support your local brand and make sure the state is collecting as much as they are entitled to in terms of excise duty. You are better paying taxes to the country for the betterment of people rather than those taxes being avoided and going to the illegal trade. Illegal trade is costing the councils an awful lot of money to clean up in terms of the residual product. Fortunately, the budget didnt bring further excise duty increases for petroleum products. Higher duty could have created another opportunity for the launderers to get a further hold on the industry. I

An important aspect of regulation is ensuring that the penalties are acting as a deterrent. They should be severe to the extent that people are discouraged from going back into that business. We feel that if you have been involved in illegal trade and you have been identified and its been completely proved then that site should not be allowed to re-open or that person shouldnt be granted another licence. That may sound harsh to some but Donaldson feels sufficient penalties should be in place. A custodial sentence of two years was issued which does send a message that if you are involved in illicit activities you will have to do your time. I think the government and the authorities are doing a lot of good work but an awful lot of Tom Noonan, CEO of Maxol, at the launch of Maxols Fuels You other work needs to be done. Can Trust campaign in 2011 It is very slow in terms of

The pros and cons of a rebate scheme

A possible solution for fuel laundering, often discussed, is the introduction of a rebate scheme. This scheme would see the removal of dye from diesel and one price used at purchase. Eligible industries or individuals would then claim back the tax. It sounds like a simple solution but there are several factors to consider: Additional administrative resources would be required to deal with the increase in claims that would come from many different industries and individuals Paper fraud could become more prevalent A rebate system in Ireland would require a similar system in the UK Without a rebate system in the UK, laundered fuel from the north could be sold in the Republic of Ireland. Then either knowingly or unknowingly, the buyer could claim back tax on laundered fuel that had not had its full duty paid on it

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Fuel 19

Fuel fraud rife across Europe

The problem of fuel fraud is not unique to Ireland. It can be seen all over Europe and the world, whether its smuggling, mixing, laundering or stretching
Land borders can always be difficult to police. The border between Northern Ireland and the Republic of Ireland presents its own challenges fuel laundering being one of them. Criminals take advantage of the two jurisdictions. They use their operations on either side of the border to frustrate the efforts of law enforcement officers. Fuel fraud remains a particularly serious problem for Northern Ireland. Up to 25 laundries were uncovered in Northern Ireland alone this year. In terms of the respective market share of diesel, illicit sales in Great Britain are estimated to have represented 4-5% of the market since 2004 and 2005, whereas the comparable figures for Northern Ireland were touching 40% between 2004 and 2007, reducing to 27% in 2008 to 2009 and 12% in 2009 to 2010. Its a marked difference and fuel fraud continues to be a problem in the area. Although it has fallen from 2007, it is still three times larger in Northern Ireland than in Britain.

The next step

There is always going to be a difficulty in terms of laundered fuels when there are two types of product with only a dye as a distinguishing factor. The UK government and Irish government are both working very closely on a marker that cant be removed or at least is so expensive to remove it wont be worthwhile. A DNA marker, of some sort, would be a good option. Of course, commonality between the two governments is essential on the matter. In a statement in relation to efforts being made to find a new marker in July 2012, Andy Wiggins, an oils policy team leader from the HMRC said: Although the UKs current fuel marker is actually one of the better quality markers in use, and not easy to launder out, we are not complacent and appreciate the need to keep one step ahead of fuel launderers. Consequently the search for an even more robust marker capable of foiling 21st century fuel launderers is essential to ensure that opportunities for fraudsters attempting to exploit fuel supplies are reduced and illicit fuel can be detected.

big duty differential between rebated fuel and fuel for road use. At the moment, in Ireland the rate of excise duty on agricultural fuel is almost 38 cents less than motor fuel and with the reduced 13.5% VAT rate, fuel fraud becomes an attractive pursuit for criminals. This demonstrates that even without the border that incentive could still be there.

Across Europe
Britain has a considerable problem with the misuse of red diesel and has seen numerous mobile rogue sites crop up in many different parts of the country. There have also been reports of Irish criminals setting up major laundering sites in the UK, Spain and the Czech Republic. Fuel laundering has been the main issue in Ireland but fuel smuggling is rampant right across Europe. According to an audit of over 1,000 fuel traders and retailers in Poland, there was a 47% rise in tax fraud from 2010 to 2012. Poland lost 3 billion zloty ( 697 million) last year, according to the Polish Organization of Oil Industry and Trade (Bloomberg, August 2013). Bloomberg also reported that Greece had seen a boom in its illegal fuel market which had increased to 600 million a year. This figure was given by the nations Finance Ministry. In Lithuania, one in four consumers have admitted to buying smuggled fuel. In the Czech Republic the government reports that up to 20% of fuel bought by consumers is illegal. Differences in tax rates across different countries is encouraging fuel fraud. This begs the question if Ireland manages to eliminate fuel laundering will it pave the way for increased levels of other fuel fraud? I

Price is the big issue

Price differences across different countries however, encourage the problem. Although the border exacerbates the issue, it is not the single driving factor. The price difference between green agricultural diesel and white diesel for road use is significant. Criminals are making large profits but even without a border, even if there were no other countries involved, there would still be an incentive to launder or smuggle fuel. Criminals will take advantage of a

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Managing the border area

Sean Kelleher works with Revenues Customs Service within the enforcement and prosecution division. He highlights how new legislation is helping to uncover greater incidences of illegal trading
The critical issue around the border tends to be in relation to fuel. The criminals in this area have a history. They know the border area well and know how to make their money. There are maybe 10 or 12 main gangs that continue to launder fuel both north and south of the border. The country is being robbed and the taxpayer is being charged the added expense of cleaning up their toxic waste.

The problem
Intersecting these criminals is not a simple process and it requires gathering intelligence, surveillance and time. Sean Kelleher explains: These criminals dont clock in at nine and clock out at five. We need to figure out the pattern, establish what they are doing and how many are involved. It cant be done on a whim. It involves covert surveillance, in isolated areas and in dangerous terrain. If these people get spooked at all theyll just stop, walk away and leave the laundry. Then maybe in three, four months or longer, theyll go back to it. We have spent a lot of time on particular laundries and suddenly they walk away. Criminals cover up fuel laundering by setting up companies or buffer traders. Sometimes they buy distressed companies to show them as the purchasers of the fuel, when often these companies are not in business at all. It is all part of the scam to cover their tracks. Laundering fuel can take place quickly. You can turn 20,000 litres in four hours. That fuel can be laundered during the night and be halfway down the country first thing in the morning.

All fuel traders must now submit a Monthly Return of Oil form (ROM1) to Revenue every month in a bid to uncover illegal sales

north theyll move down here. Its a difficult area to police. There are a number of stations in control of these criminal gangs. These are either leased out, owned by criminals or brought under control through various insidious methods. Such stations are then used to sell their product. They may even have a logo of a legitimate distributor but that doesnt necessarily mean they are distributing legitimate fuel.

New regulation is it working?

Managing the border area

Many of these criminals have been working in organised gangs for many years and know the system inside out. If we take down a laundry up here they will just move it somewhere else, normally north of the border, says Kelleher. If they are caught up in the

So far this year there has been a decline in the number of laundries uncovered. In 2011, nine fuel laundries were uncovered, in 2012, there were 11 laundries uncovered and so far in 2013 they have uncovered seven. Across the border, in the north, 25 fuel laundries have been uncovered so far this year. Sean Kelleher is confident the new legislation introduced in January is working. It is compressing the launderers a lot. All the people There are approximately 10 or that are involved in the trade 12 main gangs that continue to must submit a Monthly Return of launder fuel both north and Oil form (ROM1) every month. We south of the border are giving these monthly returns a great deal of analysis and identifying the loop holes and the scams. If you buy 36,000 litres of green diesel you have to account for it. This legislation has started to put the small-fry illegal operators out of business. The introduction of a traceability scheme provides the opportunity for Revenue to have full visibility of fuel purchases and sales in the country. I

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Tobacco 21

Revenues fight against organised crime

Michael McGill, Revenues Central Investigation Unit

Organised crime takes on a central part in the illicit trade game both nationally and internationally. Michael McGill from Revenues Central Investigation Unit discusses how the organisation is adopting a multi-faceted approach to combat this threat
Global problem
These criminals will work where they can make profits. Irelands high level of tax on alcohol, fuel and tobacco does make the country an attractive market. Ireland is one of the highest taxed alcohol states in Europe and has the highest price of cigarettes in Europe. There is also a significant profit to be made where fuel is concerned and it remains one of the biggest problems between the Republic of Ireland, Northern Ireland and Britain. However, while alcohol is by and large an intra EU problem, tobacco has a global element to it. Most of the cigarettes we deal with would be sourced out of the EU. Most would come from the Far East, the UAE, Egypt and China, so there is a slightly different dimension to each product but at the end of the day the one common denominator is money. With the increase on cigarettes and alcohol in this years budget it may provide an additional boost to the illicit trade. However McGill is confident there are good systems and procedures in place to ensure this wont happen. We always look at a group in a holistic fashion and we take a multi-agency approach to it. We inspect every aspect of it, for example, where the money is going. The money trail is very important. We want to identify where its going because if we can get our hands on the cash we can look at taxing that as well. It is hard to follow but we have techniques. The way internet banking has changed, it is much more difficult. We have developed strategies to deal with oil, alcohol and cigarettes and we have put them in place. There is a high level group that sits, chaired by the commissioner, and monitors as we go along to see how were doing. We are hugely conscious of the problem and the scale of the problem.

The level of organised crime within Europe has seen significant growth in recent years. Organised criminal gangs within Ireland are well known to the Revenue Commissioners and garda. The members of these gangs, who deal in smuggled tobacco products, fuel laundering and counterfeit alcohol, could be second or third generation and often have paramilitary links. Only last year, the Sunday Independent reported the discovery of a container of cigarettes, destined for Ireland, that came from Vietnam. These cigarettes, bought for 20 cents a packet, were tracked to the border where former IRA members were running one of Europes biggest cigarette smuggling rings. This group were reported to be making profits of 3 million a week.

The link to organised crime

All of what we do is linked to organised crime. One of our briefs is tobacco and you would have five or six large organised crime groups mainly border based that would control the importation and the movement. There would also be similar groups working on fuel laundries around the same area. These are organised criminals with national and international links. These people control a lot of this trade, particularly the larger scale activities, McGill says.

We have developed strategies to deal with oil, alcohol and cigarettes and we have put them in place. There is a high level group that sits, chaired by the commissioner, and monitors as we go along to see how were doing. We are hugely conscious of the problem and the scale of the problem.

Most of the illicit cigarettes discovered by the Revenue Central Investigation Unit are not sourced from the EU

Tobacco problem has been contained

But the question remains - are the strategies working? Are the criminals being caught? Is the volume of illicit trade on the market reducing? We have taken a very scientific approach to looking at the market here. We have commissioned a company to conduct a survey for us. There are a lot of packs youll find on the street that are legitimately here

22 Tobacco
from travellers bringing back the legal amount. We would say that there is about 7% of the market here legitimately based on scientific surveys over the last three years. The survey commissioned by Revenue and the Office of Tobacco Control in 2009 estimated that 20% of cigarettes consumed in the State had not been taxed in this jurisdiction. This figure was further broken down as 14% illicit product and 6% legally imported by passengers arriving into the State from other jurisdictions. A similar survey in 2010 and 2011 estimated that the number of illegal packs consumed remained at 15% for

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both years indicating that Revenue has at least contained the situation. Legal non-Irish-dutypaid was at 9% and 8% respectively, bringing the total figure of non-Irish-duty-paid tobacco to 24% and 23% in 2010 and 2011. However, ITMAC which uses MS Intelligence to carry out its surveys estimates the figure for nonIrish-duty-paid tobacco was much higher, at 27.9% for the second quarter of 2013. Thats up from 26.6% in the fourth quarter of 2012.

As well as having national partners, going forward well have international partners.

scanners but we have to look at where we are in the current economic environment. Of course we could do with more scanners or staff but thats just one aspect. Even with additional scanners, if we were to start scanning all the containers that came through Dublin port each day the legitimate trade would stop. A lot of the work we have to do must be intelligence driven.

Most of the cigarettes we deal with would be sourced out of the EU. Most would come from the Far East, the UAE, Egypt and China so there is a slightly different dimension to each product but at the end of the day the one common denominator is money.

European level
Europe is increasing efforts to bring in long term strategies, tighter controls and a clamp down. For the first time this year all the member states have started developing strategic plans at a European level for all countries so future working plans will come out of that. Ireland wont be just doing its own thing. These European strategies will cover all aspects from alcohol, cigarettes and tobacco. Attempts are being made to tackle this issue at these higher levels. I

Industry specific problems

On this topic, McGill adds: We have invested in x-ray machines and brought in additional

Retailers have their say

Derek Clarke, Spar, Castleforbes, Dublin Without a doubt, illicit cigarettes have had an impact on our business. They are half the price to buy on the street. The idea of bringing in a new licence is crazy. The reality is people are going to buy tobacco anyway, irrespective of whether we are paying a licence or not. There are so many indirect taxes. The list is endless. Where is it all going to end? Its getting very difficult. Ben Mullane, Mullanes Gala, Limerick Under no circumstance can we pay a licence to sell cigarettes. As an employer, we are keeping people off the dole queues, we pay all our VAT on cigarettes, we pay rent, rates, water charges and all the other government levies on beer, cider and wine. We are easy targets while illegal cigarettes, beer and cider are sold around the country and not one thing is done about it. Does this government want to close down the small supermarkets in favour of the major groups who take all their profits out of this country to the UK and Germany? Its a disgrace what the government is doing to rural Ireland. Shame on this government for targeting the self-employed. TALK IS CHEAP FROM OUR GOVERNMENT.

Gavin Moran, Texaco/Spar, Junction 14 Mayfield Yes, we have lost considerable sales to illicit tobacco. There are a lot of markets around Kildare where illegal cigarettes are for sale. These illegal cigarettes are also for sale under the counter in local foreign shops. We have seen an increase in fuel sales, whether this is a result of the new fuel legislation I cant say, but we have seen an increase.