TACKLING FRAUD AND SMUGGLING

Building on the success of its efforts to tackle tobacco smuggling, the Financial Secretary, Paul Boateng, is today announcing that the Government will use the same strategic approach to crack down on other forms of criminal fraud.

The Government also announced the latest encouraging results from the first year of its Tackling Tobacco Smuggling strategy, which is designed to stop the growth of tobacco smuggling and put it into decline by 2003:

HM Customs and Excise have achieved their key target for 2000-01 to hold the share of the UK market taken up by smuggled cigarettes to 21 per cent;
in 2000-01, Customs seized 2.8 billion cigarettes destined for the illicit UK market, almost a billion more than were seized in 1999-2000;
Customs have also cut the size of cross-Channel smuggling by 76 per cent, massively exceeding their target of a 10 per cent reduction;
in just six months, the new network of x-ray scanners detected around 80 million cigarettes and 4.5 tonnes of hand-rolling tobacco;
Customs investigators have broken up 43 major organised crime gangs involved in the large-scale smuggling and supply of cigarettes; and
in 2000-01, Customs seized more than 10,200 cars, vans and lorries used by smugglers, almost double the number seized in 1999-2000.

Tackling Indirect Tax Fraud, a paper published today, reviews these results in detail, sets out the strategic principles underlying the Government's approach to tackling fraud, and outlines the steps being taken to tackle fraud in other areas.

Paul Boateng, Financial Secretary to the Treasury and the Minister who is responsible for Customs, said:

"The criminals engaged in fraud rob our public services of revenue, undermine honest businesses, and use the proceeds to fund other forms of organised crime. We are determined to crack down on fraud wherever it occurs, and our success this year in tackling tobacco smuggling shows that the right strategies can produce real and tangible results."

DETAILS

Tackling Tobacco Smuggling

In March 2000, the Government announced its Tackling Tobacco Smuggling strategy, which is designed to put tobacco smuggling into decline by 2003. The key target for 2000-01 was to slow the previously rapid rate of growth in the UK illicit cigarette market and hold its share of the total UK market to 21 per cent.

The strategy provided £209 million for investment in almost 1,000 extra front-line staff and investigators and a national network of x-ray freight scanners designed to detect bulk consignments of smuggled tobacco. To make it easier to identify illicit goods, 'UK duty-paid' pack marks were also introduced on tobacco products, with associated offences for those found dealing in them.

The first-year results from the strategy show that Customs have met their key target to hold the illicit share of the UK market to 21 per cent. 2.8 billion cigarettes have been seized in 2000-01: 1.9 billion in the UK and 900 million en route to the UK as a result of joint operations with overseas agencies.

Customs have also achieved a 76 per cent cut in the amount of revenue lost from the cross-Channel smuggling of tobacco and alcohol, against a target of 10 per cent for 2001. 170 additional officers have been deployed specifically to tackle the 'bootlegging' gangs who run cross-Channel smuggling, and the results have been excellent, with smuggling of beer almost eliminated, smuggling of wine and spirits more than halved, and smuggling of hand-rolling tobacco cut by more than 80 per cent.

In addition, Customs investigators broke up 43 major organised crime gangs involved in the smuggling and supply of huge volumes of illicit cigarettes. In their first six months of operation to the end of July 2001, the network of x-ray scanners have also detected 79 million cigarettes and 4.5 tonnes of hand rolling tobacco, as well as 1.6 tonnes of cannabis and 46 kilograms of heroin.

Customs' policy on vehicle seizures is also having a significant effect - making smugglers realise the cost of using their vehicles to transport illicit goods. In 2000-01, Customs seized 10,219 vehicles from smugglers, up 96 per cent on the number seized in 1999-2000. Many such vehicles are often specifically designed or adapted to conceal large consignments of tobacco and other goods, for example:

a German-registered camper van driven by a couple entering the UK on holiday, which - on investigation - was found to have 240,000 cigarettes concealed in false roof and floor panelling; and
a lorry which - on investigation - was found to have a false wall in the cab's sleeping compartment behind which the driver had concealed 200,000 cigarettes.

The Government's approach to fraud

The Government today published a paper entitled Tackling Indirect Tax Fraud, which:

explains why it is essential to tackle fraud to protect the revenue required for investment in essential public services, to defend legitimate businesses, to protect wider objectives on health and the environment, and to tackle organised crime;
sets out the Government's strategic approach for tackling fraud, based on making an accurate assessment of the problem, setting clear objectives and targets for tackling it, identifying the strategies and resources required to achieve those targets, and delivering them;
reviews the experience of the Tackling Tobacco Smuggling strategy, detailing the way the strategy was developed, how it was implemented, and the results it has achieved;
outlines how this approach is being applied to other indirect taxes where the Government has made estimates of the levels of fraud, including alcohol, oils and parts of the VAT system; and
announces a series of measures designed to tackle fraud in these other areas, including:
- further improvements in the effectiveness of Customs' strategy for tackling missing trader VAT fraud;
- intelligence-led increases in the rate of checks carried out on consignments of spirits entering the UK, and tougher controls on excise warehouses within the UK;
- consultation on the costs, benefits and practicalities of introducing a tax stamps system for spirits, designed to assist in the identification of smuggled products;
- deployment of additional resources to support new intelligence-led investigations into large scale diesel frauds;
- introduction of tougher penalties to tackle the criminals engaged in the supply and use of illicit diesel;
- consultation on the introduction of an authorisation scheme for the distributors of rebated fuels and tougher obligations on them to improve control over fuels being sold for rebated use; and
- improvements in the chemical and colour marking of rebated fuel to deter misuse and enable easier detection.

To accompany this paper, the Government has also placed in the House of Commons library a technical paper, setting out the methodology which is used to produce estimates of fraud in relation to different indirect taxes.

NOTES FOR EDITORS

Copies of Tackling Tobacco Smuggling (published March 22 2000) and Tackling Indirect Tax Fraud are available by clicking on the links below.

Copies of Tackling Indirect Tax Fraud and Customs' technical paper on the methodology of fraud estimates, Measuring Indirect Tax Fraud, are also available on request from:

Analysis Division,
HM Customs and Excise,
7th Floor Central,
New King's Beam House,
London SE1 9PJ.

The documents are also available below in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website.

For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.

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