Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the implications for her Department’s policies of levels of tobacco excise taxes in Australia; and what assessment she has made of the potential relationship between trends in the level of tobacco excise taxes and (a) the size of the illicit tobacco market and (b) associated organised criminal activity.

Australia imposes some of the highest tobacco duty rates globally with excise accounting for a significant share of retail price. In the UK, tobacco duty aims to both raise revenue and reduce harm to public health by discouraging smoking. High duty rates make tobacco less affordable and are a proven way to reduce smoking prevalence and have helped reduce the percentage of adult smokers in the UK from 26% in 2000 to 10.6% in 2024.

The illicit tobacco market is dominated by organised crime groups that make money by smuggling and selling illicit tobacco products in the UK. Strong enforcement is essential in tackling the illicit tobacco market. HM Revenue and Customs and Border Force have had illicit tobacco strategies in place since 2000. Our latest strategy, “Stubbing out the problem”, was published in January 2024. The Department continues to investigate how the illicit tobacco market is evolving, including through its compliance activity, and the extent to which that may affect overall tax receipts seen.

Whilst tobacco duty has been progressively increased over time, successive illicit tobacco strategies have proven effective in tackling the size of the illicit tobacco market, reducing the tobacco duty tax gap from 21.7% in 2005/6 to 13.8% in 2023/24.