Joint Committee on Jobs, Enterprise and Innovation debate -
Thursday, 15 Nov 2012

Tackling the Black Market and Retail Crime Report: Discussion

Chairman

I am delighted to welcome the delegation from Retail Ireland and former Garda assistant commissioner, Mr. Tony Hickey, who are here to address the topic of the black market and retail crime. Retail Ireland's representatives are Mr. Frank Gleeson, chairman of Retail Ireland and retail director of Topaz Energy, and Mr. Stephen Lynam, a director of Retail Ireland. They will present the findings of an independent report recently commissioned by Retail Ireland entitled Tackling the Black Market and Retail Crime, which outlines key issues that retailers face on a daily basis and the threat posed by the black market to jobs, income and revenue. As a wide ranging representative body, the insight that Retail Ireland can offer on the issues its members face will greatly assist the committee in meeting its mandate of helping small, medium and large business to grow and increase employment. These insights will form part of our work over the coming months, which will involve travelling around the country to meet businesses and groups.

Mr. Tony Hickey will also make a presentation to the committee.

He is very welcome here today. He has spent over 40 years with An Garda Síochána and his experience will be of great benefit to us. He has also served with the serious crime squad and was later placed in charge of national support services with responsibility for the national bureau of criminal investigation, the Criminal Assets Bureau, the Garda bureau of fraud investigation, the Garda national drugs unit and the Garda technical bureau. His background and insight will certainly help us today and, perhaps, in the coming months as we produce our report. He currently works as chairman of the evaluation committee and advisory board of Risk Management International.

I now invite Mr. Lynam to make his presentation.

Mr. Stephen Lynam

On behalf of Retail Ireland, I would like to thank the committee for the opportunity to speak on this issue today. The need to tackle the black market and retail crime is of huge importance, not just to our sector, but also to the communities in which we trade and to the State, which loses significant amounts in taxation due to criminal activity.

Chairman

Sorry for interrupting, but I omitted some of the procedure and must go through it now. Members are reminded of the long-standing practice to the effect that members should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable. By virtue of section 17(2)(I) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence in connection with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that where possible they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him or her identifiable. Sorry for the interruption.

Mr. Stephen Lynam

Not at all. Mr. Gleeson will speak of the scale of the problem we all face and will go through our report. However, beforehand I will give a brief background. Retail Ireland is the national representative body for the entire sector. We represent international and national department stores, DIY outlets, electrical retailers, fashion and footwear retailers, the supermarkets, symbol groups and a range of specialist retailers. We are a division of IBEC and through that connection we also have close links with the Small Firms Association, which represents a number of small and independent retailers.

Retail crime is a serious problem and comes against a backdrop of a serious situation in the industry. Retail has had a very difficult few years, with sales down by one-third. The sectors experiencing the largest declines include furniture and lighting and the motor trade, which are down 50% and hardware and electrical goods which are down 40%. Some 50,000 retail jobs have been lost in the past few years and, unfortunately, growth is unlikely in the short term.

However, there is some good news in the sector. The retail sector still employs more than 250,000 people and is the largest employer in the country. We have a presence in every town in the land, bar none and the sector is a huge purchaser of Irish goods and products. The retail sector accounts for over 10% of GDP and almost 15% of total employment. I would like to stress also that we are an industry of small, indigenous businesses. Some 86% of retail businesses have fewer than ten employees and a similar number, 86%, are Irish owned.

It is against this background of a struggling but economically vital industry that Retail Ireland commissioned EPS Consulting and the report’s author, Peter Brennan, to collate from various sources data that shows in one place for the first time the scale of the problem of the black market and retail crime in this country. The report is solutions driven. We are not simply coming to the committee with a list of complaints. We make a series of proposals that we believe will help to combat the problem. Some of these proposals are cost neutral, but some will require State investment. However, any investment will see a return to the State many times greater than that initial spend.

I will now hand over to our chairman, Mr. Frank Gleeson, who will discuss the report.

Mr. Frank Gleeson

I welcome the opportunity to address the committee this morning. As a practising retailer, this business is close to my heart. Topaz operates more than 120 stores directly, with 1,500 employees, and we also supply 220 independent retailers. I get to see the problem every day of the week and live the issues daily. Therefore, I may be quite emotional about this presentation today.

The black market needs to be tackled, not just because of the jobs in the retail sector, as outlined by Mr. Lynam, but because of the dangers that criminal gangs pose to communities throughout the country and the huge levels of revenue that are lost to the State through illegal black market activity. This revenue is also lost to retailers and communities. Our report estimates that the State loses approximately €4 billion over a five-year period due to the black market in cigarettes, fuel, alcohol and counterfeit goods, through digital piracy and through shoplifting and theft. This is equivalent to almost 6% of PAYE collected and enriches the leaders of organised criminal gangs who do nothing to improve life in our towns and cities.

Members will see in the report details of the various categories of the black market. I will run through these briefly, starting with the illicit fuel trade, an area I am aware of on a day to day basis. Currently, fuel for off-road use is taxed at a lower rate; the price differential between the two types of diesel, green diesel and normal road diesel, is approximately 51.6 cent. Diesel used other than as auto-diesel has a special dye added to it to differentiate it from diesel to be used by motorists. The price differential acts as an incentive for criminal elements to launder the fuel and remove the dye. The illegal fuel trade is costing the Exchequer some €155 million in lost taxes every year. We estimate that approximately 12% of all diesel sold in Ireland is illegal. Much has been done to alleviate this problem, but more can be done. We need to intensify inspection levels and introduce more punitive penalties. Retail Ireland also supports a rebate scheme to farmers that has the potential to almost eliminate the problem, because once there is a cash differential, there is always a temptation for criminals to find their way around the dye problem.

There is a serious and increasing problem with illegal tobacco in Ireland. Retail Ireland supports the Government’s aim of reducing smoking prevalence in the adult population and encouraging younger people not to take up the habit in the first place. However, where there is a demand for tobacco, that demand should be met through the legitimate retail chain I represent here today. Unfortunately, Irish criminal gangs are making approximately €3 million a week in selling illegal cigarettes. The price of illegal cigarettes has fallen from €4 a packet to as low as €3.20. When we compare this to the current recommended price at which legitimate retailers sell cigarettes, nearly €9 - taxation accounts for almost 80% of the price - there is a significant loss to both the Exchequer and to retailers through additional sales. People do not just buy cigarettes, but buy milk and bread and other items on which our small corner shops rely. This is a small store issue rather than a big multinational store issue. Therefore, it is important to understand that 85% of retail in Ireland is small stores and Irish owned. Therefore, this hurts communities.

We believe criminal gangs are making approximately €3 million, which is a significant windfall for them. It is estimated that the legitimate cigarette market has shrunk from 6.7 billion in 2000 to 4.3 billion cigarettes in 2010, with no commensurate drop in smoking prevalence rates. Industry sources suggest that approximately 1.8 billion of cigarettes smoked in Ireland are sourced from the black market. To combat the problem, we recommend that excise duties be frozen so that there is no further widening in the price between legal and illegal cigarettes. We also believe there should be increased investment in detecting cigarette smuggling. Crucially, the sale of any tobacco products at a market or fair should be banned. To this end, penalties available under the Casual Trading Act 1995 should be made as strict as those which exist under the Finance Acts.

While smuggled alcohol is not a significant problem in comparison with illegal fuel or tobacco, smuggled alcohol is a growing problem. Our report states that seizures of counterfeit alcohol rose from 252 litres in 2010 to 1,309 litres last year. Industry sources put the figure much higher, with some 44,276 litres of alcohol seized during 2010 in 287 different raids. The value of this was approximately €600,000 to the Exchequer. Recent seizures of alcohol in the UK showed the products contained an industrial solvent, commonly found in nail varnish remover and screen wash. Europol, the European police agency, stated that in a recent case in Turkey, 23 people died when they consumed alcohol that contained very high levels of methyl alcohol.

The issue of counterfeit goods is huge. The OECD estimates that fake goods seized by customs at borders amount to some $250 billion a year. The International Chamber of Commerce put the figure higher at $600 billion. The main fake product categories which customers knowingly purchase include clothing, 27%; watches, 15%; and perfumes, 13%. Consumers are aware that such purchases damage domestic businesses and affect Exchequer revenues. In Ireland, according to An Garda Síochána, clothing is the most common item produced and sold by counterfeiters, with individual items being produced in the Far East at a cost often as low as 50 cent per garment. I regret to have to say that poison in children’s clothing is the latest risk emerging from counterfeiters. A recent investigation found formaldehyde in woollen and cotton clothes that was 500 times higher than recommended safe levels.

There are other areas of the black market we could also touch on. Digital piracy is a very big issue and I understand the committee will be hearing from Xtravision, a Retail Ireland member, at meetings in Kilkenny and Waterford next week, where the committee will learn more and can engage with Peter O'Grady-Walshe who can explain how difficult this issue is for him and his business.

Shoplifting and retail crime is another important issue. Members of the committee may have read last week about a Retail Ireland survey that showed that over 80% of Irish retailers have experienced shoplifting in the last two years. As the recession continues, crime in this area is continuing to rise. I have set out the scale of the problem. I will ask Mr. Lynam to summarise what Retail Ireland is trying to do to combat it.

Mr. Stephen Lynam

I thank the committee for its time. We have already spoken about the need to freeze excise duties, invest more in detection and reform the Casual Trading Acts. We believe a whole-of-government approach to this issue is needed. The report states that responsibility for combating these problems falls between several Departments. Those Departments need to co-operate with us and with each other to combat the black market. We will host a round-table conference on this issue on 29 November. We have sent invitations to key stakeholders, including retailers, suppliers, and relevant officials in the Departments of Jobs, Enterprise and Innovation, Finance, Justice and Equality and Social Protection, the Revenue Commissioners and the Garda Síochána. We want to ensure the approach we advocate is adopted. The meeting will be chaired by the Minister of State with responsibility for small business. I would like to take this opportunity to extend an invitation to representatives of this committee who may wish to attend. We believe we have ways of tackling our serious problem with the black market. We are eager to work with the committee to bring about a fairer and safer legitimate supply and retail chain. I thank the committee for its time. We will be delighted to deal with any questions.

Chairman

I thank Mr. Gleeson and Mr. Lynam. We will take questions after Mr. Hickey's presentation. Some of us will try to attend the conference to which Mr. Lynam has invited us. We recognise that it is a cross-departmental issue. That is why we invite various Ministers to accompany us when we go around the country to meet various organisations and hear about what is going on. We try to have a different Minister from a different Department with us at each stage. As Mr. Lynam said, a whole-of-government approach to this issue is needed. We will try to feed that into our report as well. I believe we share the same thinking on this issue. It is a matter of making progress from there.

Mr. Tony Hickey

We appreciate the opportunity to make a presentation to the joint committee. Having listened to the notice of caution that the Chairman read earlier, I am not sure if I should say anything.

Chairman

I had a quick look through Mr. Hickey's presentation and I think most of it is okay.

Mr. Tony Hickey

The Chairman has given a pen picture of my CV. I do not intend to repeat it. I wish to speak briefly about my current involvement with Risk Management International, RMI, which is an independent international risk management service provider. We have many prominent clients in the retail, fuel, tobacco and clothing industries, including Philip Morris International. RMI is Ireland's largest independent risk management service provider. We offer a portfolio of risk-related services to enable clients to manage risks with greater confidence. We hope to help our clients solve a variety of problems that typically fall outside the scope of conventional mainstream business activities. RMI is the largest shareholder in React UK, which is the largest brand protection service provider in the UK for luxury goods. Since earlier this year, RMI has been operating a website, whistleblowerconfidential.ie, the purpose of which is to make confidential reporting work for concerned persons with truthful information. Since the beginning of this year, the service been generating notifications to organisations at risk, including banks, corporate entities and State agencies. Those reports generally relate to corporate fraud and assets put beyond the reach of creditors. The whistleblower service has generated intelligence and information that have led to major finds by law enforcement agencies. A recent find was one of the largest in the history of the State.

I will skip over the section of my presentation that sets out my CV, as the committee has heard it already. My expertise relates to the criminality surrounding the black market, rather than the economic issues highlighted by previous speakers. I will focus on this element of the matter under discussion in the first instance by providing some facts and information on what is known by the authorities at home and abroad about criminal involvement in the black market and retail crime. I will be happy to answer any questions as best I can after I have concluded. There are huge sums of money to be made from the black market. This explains its attractiveness to criminals and subversives. It is all about money and profit. Many of those behind the major cigarette smuggling and fuel laundering operations in this country are linked to defunct and active subversive organisations. Members will be aware that a new IRA faction, which has seemingly resulted from a merger of existing disparate dissident groups, claimed responsibility earlier this week for the recent murder of a prison officer, Mr. David Black, on the M1 road to Belfast. A report published last month by the US Congress, citing that country's Department of Homeland Security, listed the Real IRA, Hizbollah and Hamas as global terrorist groups that are financed through the illicit tobacco trade. The 2012 cross-Border organised crime assessment prepared by the Department of Justice and Equality and its counterpart in Northern Ireland in conjunction with the Garda Síochána and the PSNI stated that dissident republicans are generating significant sums of money from fuel laundering and tobacco smuggling.

We know from our history that smuggling is not new to Ireland. When I was in Derrynane a few years ago - it is not Golden Vale country - I wondered how the Liberator, Daniel O'Connell, had such a nice lifestyle and was able to be educated at home and abroad. I discovered that his ancestors engaged in the smuggling of wine from Spain. I think the Smugglers' Inn and the Smugglers' Cove are to be found in the area.

Senator Mary M. White

He got his education from it.

Mr. Tony Hickey

When I checked it further, I learned that the Liberator did not know anything about smuggling. He was not involved.

Senator Mary M. White

It was his uncle.

Mr. Tony Hickey

We know the history of this country, with the Border, the attitude towards smugglers and everything else. It has reached a different level at the moment. The most recent Europol organised crime threat assessment, in May 2011, highlighted that Ireland is a "preferred destination" within the EU for cigarette smuggling because we have the second highest retail price for cigarettes in Europe. As the price charged here is four times higher than that charged in many other member states, Ireland is seen as a lucrative market for the illegal trade. I believe that 10,000 cigarettes can be bought in Dubai for as little as €30. By selling 200 of them for €60 in this country, one can make a profit of €3,000 on a small shipment. Apparently, a container of cigarettes can be bought and shipped from China for €300,000 and generate potential resales of €5 million. Some 120 million cigarettes, valued at €500 million, were seized at Greenore Port in County Louth in 2009. This haul has been traced to the Philippines. It was the largest seizure of its kind in Europe. A criminal syndicate of former subversives and smugglers who are active in the Border region was reported to be behind the haul. Officers from the customs division of the Revenue Commissioners, assisted by gardaí, uncovered two oil-laundering plants in County Louth three weeks ago. One of the plants, which was near Hackballscross, had the capacity to launder 18 million litres of fuel per annum, with a potential loss to the Exchequer of €9 million per annum. Officers also discovered 36 tonnes of toxic waste and a shebeen on the premises. They seized spirits on which no duty had been paid. Two men from Northern Ireland and a man with an address in County Louth were arrested at the scene. RMI provided critical information to the law enforcement personnel involved in this instance.

Having spoken to law enforcement officers internationally over quite a while, I understand that some traffickers throughout Europe who had started to use existing cigarette routes for the transit of drugs have reverted to cigarettes because the global economic downturn has meant there is a lesser market for substances such as cocaine. There is less risk involved because a different attitude is taken in the case of cigarette smuggling. If smugglers are arrested, the penalties are lax. In Ireland, the mandatory sentencing threshold for drug traffickers is ten years. We will speak later about the penalties and sanctions that are in use for cigarette smugglers. There is anecdotal evidence in this regard. When we were investigating the Gilligan gang, we discovered that the truckers and couriers used in the early stages started life as smugglers and couriers of truckloads of cigarettes. Some of the people who were working for the gang as bagmen handling money convinced themselves and their families that they were smuggling cigarettes, even though they knew deep down that cannabis and cocaine were the actual substances being transported. For the past 20 years, people in other countries who have been involved in shipments of drugs, including cannabis, have thrown in sweeteners such as a few automatic pistols and, in some cases, sub-machine guns. I have no evidence that this has happened in the case of cigarette smugglers. I mention it to illustrate the type of thing we are dealing with. Having interviewed smugglers, I know that the rationale they use is "If we did not do it, somebody else would".

A cannabis trafficker will say that cannabis is less harmful than cigarettes. This is about mindset and trying to change attitudes and behaviour. Another issue is the market, namely, the people who buy the counterfeit or illegal cigarettes and, as in the case of those who use cocaine recreationally, do not make the link with the gangland killings and assassinations. It is through education that we can change mindset, attitudes and behaviour. It is not easy to change mindset. If it was, the problem would have been already solved somewhere in the world.

It is no surprise, given the profits and sanctions, that criminals are moving from the risky operation of cocaine smuggling to cigarette smuggling. Anecdotally, it was reported that flyers with a contact number which people could ring if they wished to buy particular brands of cigarettes were being distributed in housing estates and apartment complexes in Sligo. In April this year, customs officials discovered 38 million cigarettes in a container coming through Dublin Port. This had a retail value of €15 million and was the third largest seizure in the history of the State. The value of seizures in 2001 was €70 million and in 2009 was €120 million. Subversives, predominantly from the Border region, are believed to have been behind the seizure at Dublin Port last April. According to Revenue Commissioners' reports, they are becoming European leaders in illicit fuel laundering. The UK customs have been in contact with Irish counterparts during the past year as part of investigations into the spread of fuel laundering in England, the Czech Republic and Spain.

To tackle the fuel laundering and illicit tobacco trades it is necessary to reduce the current incentives to criminals who engage in such black market activities. Fines and prison sentences should be brought into line with the enormous profits available to criminals. The average fine in 2011 for cigarette smuggling was €1,349. This makes a mockery of the efforts of Revenue and the Garda to shut down black market operations. This type of fine is not likely to act as a deterrent for the criminal gangs who, as already mentioned, are making an estimated €3 million per week in profits. The penalties imposed by the courts for smuggling and selling illegal cigarettes are inconsistent and generally weak. Figures from Revenue for the second quarter of 2012 show that the average fine for selling illegal cigarettes is €2,500, a decrease of just over 20% since the first quarter and the average fine for smuggling cigarettes is down by 37% from €1,875. According to Revenue figures in 2011, the Revenue Commissioners obtained 101 convictions relating to cigarette smuggling and 30 custodial sentences, of which 20 were suspended. In 2012 to date the Revenue Commissioners has obtained 33 convictions relating to cigarette smuggling and 13 custodial sentences, of which four were suspended.

There are obvious public health reasons it may be impractical to remove the current price differential between legitimate tobacco products in Ireland and smuggled or counterfeit foreign tobacco products. The Government should think long and hard before increasing this price differential through further tax increases as this will only serve to encourage more criminals into the lucrative business. There is a potential significant public policy conflict in this area where public health objectives clash with national security and crime policy issues because of the people involved and their activities.

In 2011, nine oil laundries and 327,000 litres of laundered fuel were seized, together with nine tankers and 29 other vehicles. Some 16 people were arrested in the course of these operations, with files being sent to the Director of Public Prosecutions who has to date issued directions to prosecute on indictment in respect of five of these cases and on summary disposal in a further case.

Chairman

Perhaps Mr. Hickey would deal now with some of the policy solutions as we must move on. I am conscious that some Senators who have questions may need to leave soon for a vote.

Mr. Tony Hickey

The bottom line is that a successful strategy to combat the growth of the black market and retail crime in Ireland must comprise implementation of overlapping measures, including robust enforcement, legislation, where necessary and enhanced court fines and penalties. The investment in tackling the black market should be benchmarked proportionally against the revenue being lost to the State. Every additional €1 million invested in resources to tackle the black market will result in savings to the State of €2 million to €3 million, a reduction in direct Exchequer losses, money that will provide surplus savings that are quantifiable and a reduction in an essential source of revenue for subversive gangland criminals and, on the face of it, value for money.

Another specific policy proposal of how to apply these resources, as covered already by Retail Ireland, is that of whistleblowing. This country has a chequered history in terms of informants and information. However, as instanced in the not too distant past people will give information if they are paid to do so. As well as these specific measures, politicians must be vigilant of the unintended consequences of well-intentioned public policy measures such as excise duty increases and so on. Finally, our legislators should reflect on the use of resources. When one looks at the statistics in regard to the number of inspections carried out of newsagents, smoke free zones and so on by and large compliance is high. I learned a great deal about budgets in a previous role. However, that was at a time when we had more money. Budgets and money are always difficult issues. Resources must be deployed where crime levels are higher. It is illogical that there is so much effort being put into policing smoke free zones and newsagents as opposed to the traffickers and smugglers.

Without labouring the point, I served in the Garda Síochána at a time when more than 600 people were killed on the roads in this country. Through education, law enforcement, legislation and penalty points, there has been a dramatic reduction in the number of people killed on our roads, although even one death is one too many. The deployment of additional resources to tackle the illegal cigarette market and diesel trade would be self financing and, probably, profitable through a reduction of sales which avoid taxation and would be proportionate in terms of balancing public health objectives and reducing crime.

Chairman

I thank Mr. Hickey for his presentation and apologise for cutting him short. However, we have a copy of the full presentation, which we can go through in more detail when compiling our report. The committee will be able to work on a cross-departmental basis in respect of many of the issues raised by Mr. Hickey. As I understand it, Mr. Hickey's main message is that resources should be targeted at areas where best results can be achieved. In his opinion, it is not that additional resources are required but that those available should be better targeted.

Mr. Tony Hickey

Yes.

Chairman

We will now move to questions from members.

Senator David Cullinane

I thank Mr. Gleeson, Mr. Lynam and Mr. Hickey for their presentations. We are all agreed that the black market undermines our domestic economy, costs jobs and has implications for workers' rights, which I will explain later. It also costs lives. Mr. Hickey made the point that there is a connection between the black market, criminality, drug gangs and gun crime. This problem needs to be eradicated. It is important that resources are put in place to do so.

For me the core issue is tax compliance. It is important all individuals and companies are tax compliant. Those operating in the black market do not pay tax. It is in this area that some of the energy, in terms of resources, needs to be targeted. When there is an unlevel playing field, with some companies and people involved in smuggling and so on not paying taxes, this has implications for legitimate businesses which do pay their taxes. It is true to say that some companies are involved in the black market in terms of not paying their employees' PRSI contributions, which means employees are in turn not protected in terms of their benefits. This impacts on competing companies resulting in their having to cut costs which, in turn, impacts on employees. The black market impacts not alone on the economy, which is important, but on workers.

We must be innovative in how we address this issue. Mr. Hickey hinted at one way we could address the issue of fuel smuggling. There is no doubt that we need to deal with the criminal element of this. I agree with intensifying inspections and the introduction of more punitive penalties and so on. However, perhaps harmonisation of taxes across the island could also be considered. Working with our counterparts in the Assembly in the North we could pull the rug from under those people engaged in fuel smuggling. As also mentioned by Mr. Hickey, while we need to address the issue of supply and sale we also need to address the issue of demand, which is a big issue. There are people who will buy illegal goods, including cigarettes and other contraband items.

As was said, they do not make the connection between what they are doing and building criminal gangs, criminal empires and all that goes with this. In the view of Mr. Gleeson and Mr. Hickey, what more could be done to increase awareness of this issue which is critical? I agree on all of the measures we need to put in place to deal with the criminal gangs, the sale and distribution of goods, but reducing the demand is also as important, if not more so. We see this, for example, in the case of DVDs, on which a message is played at the beginning. Work is being done, but more could be done. Will Mr. Gleeson and Mr. Hickey comment on the issue of reducing demand, as well as dealing with the supply side?

Deputy Michael Conaghan

Where the report details the impact on jobs in a fragile economy, it draws attention to the significance of what is happening and the absolute necessity to tackle the issue more effectively. It is almost a self-inflicted injury to the economy. I want to put the issue in perspective by asking Mr. Hickey a question about the modern origins and dynamic of smuggling and the financial implications for the country. There has always been smuggling along the Border, but the traditional form of smuggling is now part of romantic folklore. On the origins of the current phase, I am firmly of the view that the key authors were the paramilitaries, including the Provisional IRA. Obviously, the problem has spread, but it is very important to understand the origins of something if one is tackle it and call it by its proper name. Am I accurate in suggesting this is not old style smuggling, that it is qualitatively a different activity that has its origins in a particular time in modern history and involves the contextual presence of paramilitaries who are the parents of this phenomenon? I would like to get Mr. Hickey's angle. If we are trying to tackle something, we have to look at its origins and the dynamic to find whether it has changed. Obviously, it has because other categories of criminal have become involved. It is important that we try to find the original source and understand the dynamic.

I tabled a question to the Minister on fuel laundering and suggested a rebate to farmers on ordinary diesel, for example, would be a much tidier way of dealing with the issue and that it would undermine the dynamic of this category of illegal activity. The Minister's reply was that it would be too expensive. However, the expense involved in not tackling it by new methods is far greater and incalculable in terms of, for example, the increase in crime. I urge the committee to ask the Minister or one of his staff to come to deal with this issue, as there are more clever ways of dealing with the threat. Having a fragile economy is one thing, but these are self-inflicted injuries to the economy. We need to address the issue.

With regard to the figures in the report concerning tobacco, the Revenue Commissioners seem to have a different figure. The Retail Ireland figures seem to range to about 24%, while the Revenue Commissioners have a figure of 14%. It has been mentioned by the Irish Cancer Society that these figures have been deliberately inflated - I am using its language, not mine - or perhaps overstated for a particular reason. Do the delegates have a view on the matter?

Mr. Frank Gleeson

I will deal first with the question on fuel laundering as it is easier for me to answer.

Certainly, the harmonisation of taxes between North and South would be a good idea, of that there is no doubt. However, the fundamental fix, as Deputy Michael Conaghan said, is equalising duty rates for green and road diesel because we would eliminate the opportunity in respect of the figure of 53 cent immediately. Our recommendation indicates that a rebate scheme for farmers should guarantee no cash flow implications and minimise paperwork. The scheme should be linked with other regular agriculture payment schemes and its operation could be outsourced by way of a competitive tender process to reduce costs. The problem would be fixed overnight if we were to equalise duty rates for green and road diesel and there would be no need for enforcement, other than in the Border counties.

On a positive note, there has been some action taken by Revenue and the Garda such that there is now in place a licensing regime for green and road diesel and every service station must have two licences. This is being enforced by the Revenue Commissioners locally, which is welcome. There is also the "know your customer" fuel tracing Revenue online product information system that will be introduced in February. These are positive steps, but they are only stemming the tide of what is significant activity engaged in by illegal gangs.

On the use of dye, criminals will just figure out a new way of taking it out. Every time we have a new dye, this happens within three to six months. I agree with both Deputies and the Senator that the fix is equalisation.

In regard to tobacco, we published both figures for the reason that there are conflicting figures. Revenue states the figure is €250 million, whereas the trade associations, retailers and tobacco manufacturers believe it is closer to €500 million. Whatever number we use, it is still a massive cost to the Exchequer. If it is €250 million, that amounts to the extra taxes or cuts we have to raise or make for citizens, which is unacceptable. Our latest intelligence is based on the many things we do in the industry. For example, we pulled packets out of litter bins around the country to see what was the percentage of illegal tobacco cartons discarded. This is a very good barometer of where there is activity and the level varies dramatically. For example, in Waterford there were high levels of up to 40%, whereas in Dún Laoghaire it was 10%, with the average figure being approximately 30%. It is a huge problem and, whether the figure is €250 million or €500 million, we have to tackle it.

Our recommendation is more resources should be provided. Such is the scale of the problem, it is our belief that in the short term we probably need to put a competitive tender in place to have some experienced investigators do the investigation work for the Garda and the Customs service and then let the Garda and the Customs service take enforcement action. The process would pay for itself almost overnight.

In terms of extra taxes on what is already a heavily taxed product and retail business, we have reached a tipping point. Anyone who knows anything about the retail business will say tobacco is overtaxed relative to the position in other markets. Therefore, while there is that attractiveness, it presents a big opportunity for smugglers. While I do not believe the taxes can be cut because the Government needs the money, our message is that we cannot afford any more. Clearly, there should be an awareness programme similar to the one in place in the United Kingdom where the www.dodgycigs.co.uk website tells people about the implications and dangers of buying tobacco. It is not good for the individual, but it is also not good in terms of the cost to the individual through extra taxes or cuts.

That is the high level feedback I wanted to give to the committee. Perhaps Mr. Hickey might like to add to what I have said.

Mr. Tony Hickey

First, on the issue of tax, for the past 14 years, when there were seizures of illegal cigarettes or at laundering plants, the Criminal Assets Bureau was always involved at an early stage. Whatever information is collected is fed into the CAB which looks at the financial side. Its business is to follow the money trail. I assure the committee that that has not stopped.

On the connection between the subversives and the dynamics of the problem, in the 1970s subversive organisations financed themselves through bank robberies. There was a channel running from Noraid in the United States, which meant money was money coming in from abroad.

Things change. For some time, individuals in the Border region have been driving this whole business, and they need money. The lines of demarcation have become blurred. It is a small country. Criminals are criminals and criminal activity is criminal activity. The gangs are very fluid. Although sometimes they shoot one another and one group will extort money from another, when occasion demands they can work together. That is the situation and it is not easy to deal with it, although there have been some spectacular successes. However, more needs to be done.

Deputy Michael Conaghan

As a modern phenomenon, the masterminds involved are easily identifiable compared to those behind the traditional smuggling that was always part of Border life.

Mr. Tony Hickey

Some of the main people - I will not name them here - were in prison, but they cannot remain locked up forever. A kind of myth is generated about people who are never caught. From my experience of dealing with crime and criminals, I know they say we will not catch them for everything they do but we will for part of it. At any given time, people involved in crime will serve prison sentences. Members will know from the media that in general any person who is charged with a serious crime will have his previous convictions outlined in the courts. These run into dozens, sometimes even 50 or 60, which means action is taken. Ironically, they make contacts in prison. Some of the major gang members in this country met each other for the first time in prison, although that is not an Irish phenomenon. When South American criminals first came to Spain and engaged in cocaine smuggling they met Spanish cigarette smugglers in prison and many of the major routes from South America to the coast of Spain were set up in that way. It is all very difficult and it is hard to take anything in isolation.

Deputy Michael Conaghan

However, the main authors of this modern smuggling phenomenon are linked directly to paramilitary organisations.

Senator David Cullinane

What new measures have been put in place to address the issue of demand?

Mr. Tony Hickey

I believe we have covered that; the Senator can read the documents provided. We have no perfect solutions but we outline strategies we believe will improve the situation.

Chairman

The point speakers were making was that people think this is a victimless crime. They do not realise there are job losses and that people can lose a great deal of money.

Mr. Stephen Lynam

That is a good point. We need to concentrate on the supply chain. If we were to quash demand overnight, ultimately the problem would disappear. One of the recommendations in our report is that the Government should invest money in an awareness campaign. There is only so much we can do. The State has invested in awareness campaigns of all sorts. The more people think this is a victimless crime whereby they can get a good bargain, the longer it will persist.

Apart from the fact that this money is going into the hands of criminals, there is an issue of consumer rights. If one purchases something on the black market one's rights as a consumer are non-existent. One cannot get one's money back; there is no best-before clause or anything of that kind. One loses all one's rights when one parts with the money. If consumers were informed about that we could do a lot of work.

Mr. Frank Gleeson

With regard to fuel laundering, there have been many times when unsuspecting motorists have bought fuel for 10 cent cheaper than the local price because it was a great deal. The problem is that if one uses this fuel for any period it will damage the car's engine, which can cost between €3,000 and €15,000 to replace. Not many people know that - it is a secret that has not been told. We cannot say it, unfortunately, so it must come from the Government or from trade associations such as the AA which, in fairness, does try to highlight that fact.

Given that tobacco can be sold on the street, this trade is difficult to tackle. For sure, we need stronger enforcement and more scanners at the ports. We also need more intelligence about the distributors, as I might call them. Black market tobacco distributors are typically either paramilitaries or highly organised criminal gangs. Do gardaí have enough resources, or could we give them some in the form of outsourcing? To stop this happening on the streets we need to have better enforcement in the form of fines. We have put forward one or two interesting suggestions. For example, instead of imposing fines, how about taking away current or future State benefits, payments or concessions to the equivalent value of the smuggled goods being sold? The casual street seller who is defrauding us of hundreds of thousands of euro could be hit in his or her pocket through any future benefits the Government might supply. That is an interesting proposal. Obviously, there should be bigger fines and custodial sentences for the more organised activity, but the actual transaction must be painted as an unacceptable purchase on the black market, not as a victimless crime. The victims of this crime are, first, the Exchequer and, ultimately, the consumer, who must pay more taxes and bear more cuts as a result of the €860 million that is lost to us.

Chairman

On the same point, Mr. Gleeson mentioned the website dodgycigs.co.uk. Were there benefits arising from that, and have there been any reports?

Mr. Frank Gleeson

Mr. Lynam might answer that.

Mr. Stephen Lynam

That is something we will have to look at. It was an industry initiative and I am unsure how successful it was. However, the idea of informing consumers about the dangers is not a bad one.

Mr. Frank Gleeson

The UK has lower rates of tobacco smuggling. I am part of a petroleum and convenience retail association which produces worldwide figures. Ireland sticks out as one of the worst markets for tobacco smuggling, which is shocking. It is embarrassing for me when I am sitting at a board meeting of 50 people who tell me Ireland is the worst and I tell them we are trying to deal with the problem. We have the highest prices for tobacco and the highest percentage of smuggled tobacco. We are a very developed economy so we should be able to deal with this, but it appears we are not doing so. That is the issue.

Deputy Anthony Lawlor

The witnesses mentioned that on average 30% of cigarettes were smuggled, with a figure of 40% for Waterford. Does Mr. Gleeson have statistics for each county nationwide?

Mr. Frank Gleeson

We do, and I can pass them on.

Deputy Anthony Lawlor

That would be good.

Mr. Frank Gleeson

They are taken from an industry-commissioned report which is prepared on a regular basis. To provide some background, the report is financed by the tobacco companies and the retail organisations in order to understand where the problem lies. Effectively, they go out and pick up packets of cigarettes from bins to figure out the numbers involved. This is probably best described as non-duty-paid tobacco because in some cases the tobacco is brought in from abroad in vast quantities without any duty being paid. It is not the 200 cigarettes people bring back from their holidays; it is the suitcases full of cigarettes that we see being seized in quantity at Dublin Airport. The report also includes the counterfeit products that come from China, Taiwan and such places. I will pass on the report.

Deputy Anthony Lawlor

It might have something to do with the demographics of the individual counties.

Mr. Frank Gleeson

It does. We find that in areas where there has been significant unemployment there is a higher incidence of counterfeit tobacco.

Deputy Anthony Lawlor

Mr. Gleeson might provide me with other information.

Chairman

I can inform members that Newbridge is in the top three. Meath came fourth.

Deputy Anthony Lawlor

Newbridge is in the top three? That is not my constituency.

Chairman

Yes. Waterford city is there, too. I am just letting the Deputy know this.

Senator Mary M. White

The delegates are welcome. It is frightening to listen to this information and to read about it. A Minister must take this issue by the scruff of the neck and deal with it. The country is physically so small that it should not be impossible to deal with the problem if the right approach is taken.

I refer to the report we received from the Oireachtas Library. The United States does quite well, with about 7% of GDP lost, but we lose 11% to 12%. Are the cigarettes smuggled in by Eastern Europeans? If that is the case, why can it not be dealt with? This is what is said anecdotally.

Mr. Stephen Lynam

I would not pick any particular group. One interesting story we heard, although it is anecdotal rather than gospel, is that a production facility in China was found to be producing a brand of cigarette that is available only in Ireland. Such was the level of demand and the clear customer base that a production facility in the Far East was producing a range of cigarettes that were sold only here and not in any other market. That is the scale of the problem.

Senator Mary M. White

We might consider the great work done by the Criminal Assets Bureau.

As this is not my area, I am not au fait with it, but from a distance I have admired the work of the CAB which appears to be the most professional investigation unit we have ever had in the State.

The region about which I am concerned is the Border area, as well as the issue of paramilitaries. I do not have any information, but is the paramilitary group not a small one that could be dealt with? I do not intend to be naive or simplistic, but we need to take control of what is happening in the North. The fear of God must be in people in the North following the murder of Mr. Black. Why can the paramilitary group not be dealt with, as those involved must be known? What should the Government do in this regard? As the committee will not resolve the issue, it will have to be done at political level by the Minister for Justice and Equality who is effective. What does Mr. Hickey think he should do? Fuel laundering and cigarette smuggling are the major issues. What is being done in the United States by the CIA and the FBI? Is it a resource issue? The chart provided by the Library and Research Service indicates that Bulgaria, Romania, Turkey, Greece, Poland and Hungary are the worst offenders in terms of the amount of GDP lost in the shadow economy. If Mr. Hickey was Minister for Justice and Equality, what would he do to tackle the issue? I know that he knows what he is talking about; that is clear from his record. However, the day is coming when it will be necessary to have experts and professionals as Ministers.

Chairman

There are many such instances.

Senator Mary M. White

If Mr. Hickey was Minister for Justice and Equality, what would he do to tackle the issue?

Chairman

This is the Joint Committee on Jobs, Enterprise and Innovation and we believe there is a major issue in terms of job, Exchequer and tax losses. We recognise, however, that the report from the committee will have to cover all Departments and we will make recommendations to each Minister on what we believe has to be done. I am conscious that we will not get all of the answers today, but we hope we will be able to do so in the next six or seven months. The Senator's question is fair in focusing on the issue.

Senator Mary M. White

What would Mr. Hickey do if he was in the job?

Mr. Tony Hickey

I would not like to give the impression to the committee that nothing has been done. It is self-evident that in the past ten years there have been spectacular successes by the law enforcement agencies-----

Senator Mary M. White

There are major successes all the time such as the announcement of a large number of jobs.

Chairman

We will deal with the first issue.

Mr. Tony Hickey

There have been spectacular intelligence-led successes against the dissident groups and the IRA, but, unfortunately, this is an ongoing problem. It is not correct to say other countries have solved this problem. There is a tendency in Ireland to say we are worse than everybody else.

Senator Mary M. White

The charts indicate that we are not bad in the general scheme of things.

Mr. Tony Hickey

I am not familiar with-----

Senator Mary M. White

In case I am misunderstood, I am reading the chart provided by the Oireachtas Library and Research Service.

Mr. Tony Hickey

As I am not familiar with the statistics given by the Senator, I cannot comment on them, but it makes no difference, as we are talking about the position in Ireland. There are ongoing operations. We have legislation in place and a constitution under which we must operate. The activities of the people mentioned are fluid, despite the Good Friday Agreement, the peace process and so on, and the issue will not be resolved here. However, I would not like to give the impression that nothing is being done. These are small groups and quite a few of the people about whom we are talking have been in prison and released, while others are before the courts. Therefore, it is not all bad news and a disaster. Some of the suggestions made may help to eradicate the problem, but it is difficult to solve, as there are supply and demand issues. People go into shops to buy a packet of cigarettes and smoke them, yet a notice on the packet reads, "smoking kills". One could have a skull and crossbones or a tombstone and skeleton on it and some would still smoke. People will still buy contraband goods, as they go for a bargain. It is like the drug trade. It is an international phenomenon which has not been solved anywhere. If one was speaking to a police office from Colombia in South America, he or she would say that his or her country would not have a problem if people in western and European countries did not use cocaine. It is the chicken and egg syndrome, but we must keep at it. That is the reason we are here to make suggestions. However, we will not solve the problem overnight. We can all remember the grim situation of the 1970s and 1980s and what happened in the North because of the activities of the Provisional IRA and various other groups. It is, of course, disappointing that there are people who are still engaged in this activity, but it is now on a different scale. The Criminal Assets Bureau was set up in 1996 and it appeared to be the answer to our prayers. Nevertheless, there is drug dealing; there are criminal gangs and people are being assassinated. Sometimes people are shot because somebody does not like them.

Senator Mary M. White

While this is not my subject and I am not au fait with it, this makes for horrific reading. Every few days people are shot dead. There are murders because of drug wars. What is being done to bring those responsible to justice?

Chairman

I do not want to get into a discussion about shootings and the drugs problem; suffice to say there is a direct link. It is likely that those involved in dealing in drugs make money from engaging in lesser offences, but it is all linked. Is that a fair statement?

Mr. Tony Hickey

That is a good point. There are certain criminals who get involved in virtually everything that is illegal.

Chairman

They use the profits where there are major consequences in terms of fines and convictions.

Mr. Tony Hickey

Yes.

Chairman

The profits are used to fund other parts of the business. Therefore, there is a link.

Mr. Tony Hickey

I would not like to give the impression that nothing is being done. For some time the prisons have been at bursting point. I am not aware of any criminal who turned up in prison to hand himself in. They all have to be investigated and processed.

Senator Mary M. White

It is a bonanza.

Chairman

The point is well made. What Mr. Hickey is saying is cases are investigated and a lot of work is being done.

Senator Mary M. White

It is chaotic.

Chairman

There is much work being done, but it may be a case of rearranging resources to target certain areas to ensure greater benefit.

Mr. Tony Hickey

Possibly. Of course, it is bad, but I do not subscribe to the view that Ireland is the worst in respect of any type of crime.

Chairman

That is not the case.

Mr. Tony Hickey

People will say that. I have been in cities all over the world and one does not see police officers on the streets. Some cities are very dangerous. When I was in Rome, I asked a taxi driver if there was crime in the city. He said if one came to his country, one had to mind oneself. There is crime in every country. A taximan in Dublin would probably say Ireland was the homicide capital of the world. We must have national pride and do the best we can.

Senator Mary M. White

This phenomenon of gang members being shot and people being murdered around the perimeter of the city-----

Chairman

I want to keep the debate focused on the issue with which we are dealing. In fairness, the report from the Oireachtas Library and Research Service from which the Senator has quoted relates to the black market and people avoiding paying taxes. I know the subjects are interlinked, but we will try to keep to that issue.

Mr. Tony Hickey

What we are doing today is timely.

Mr. Frank Gleeson

I agree with Senator Mary White that a whole-of-government approach is needed. I am delighted that we are discussing the issue. This is a huge step forward because it would not have been discussed six months ago. It is good that the report was produced and that people in government are taking an interest, as we need cross-departmental support and some champions. The jobs agenda is a major one. Some 50,000 jobs have been lost in the retail sector and we would like to have some of them back.

There are a number of recommendations in the report that would be self-financing. When I speak to the Garda or customs officials, with whom we work closely, who work tirelessly on the ground, they would say in other jurisdictions more resources are put into these types of activities in recessionary times because they know people move to the black market.

Senator Mary M. White

Yes.

Mr. Frank Gleeson

More focused resources are needed. Mr. Tony Hickey spoke about the level of inspections of licensed retailers and they number in the thousands. There are very few convictions or prosecutions because the retail trade generally is compliant with the regulations governing the sale of tobacco and alcohol. When the retail trade does not do it right it gets prosecuted and large penalties are imposed. I propose the focused use of some of those resources and cross-governmental support to address this problem. It is great to be here today and I hope the committee will take on the issue of the tackling of this problem and be our champion because the retail sector needs to get back jobs. That would be the message I want to get across and Senator Feargal Quinn would understand that more than most.

Senator Feargal Quinn

I apologise for being late. I had to attend another function and I could not get here until now. I can remember walking through Talbot Street 15 years ago when tobacco was openly sold but that problem was solved. I do not go down Talbot Street much now but I do not believe tobacco is sold as openly as it was then. However, illegal diesel and petrol is now coming through on that basis. Was something specific done ten or 15 years ago, and Mr. Hickey would know that better than the rest of us, that put a stop to that and how can something similar be done to address the problem of illegal sale of fuel now?

Mr. Tony Hickey

I am not au fait with what exactly is happening at present but I know anecdotally that there are units of plain clothes officers in the city centre and they round up some of these people occasionally. They probably do not catch all of them. It is like everything else, it is a small town and these people will become known to the officers operating there and they move around. I am not sure about what is happening on Talbot Street now; some people say cannabis has been sold there on occasions. I have been there on and off-----

Senator Feargal Quinn

That trade was done very openly and it was stopped.

Mr. Tony Hickey

It was sold openly at that time and concentrated efforts were made to address it.

Chairman

A key to addressing this is the use of concentrated efforts.

Senator Mary M. White

Consistently.

Mr. Tony Hickey

And consistency.

Mr. Frank Gleeson

I have some bad news. This problem has moved from Talbot Street nationwide and it is to be found in almost every village and pub. It has gone even further underground. It used to involve a small group of people with a limited supply chain, now the products are available nationwide for sale on the local streets.

On the problem of fuel laundering or the illegal sale of fuel, new licences are to be introduced. I believe many of the illicit fuel sites will close within the next six to 12 months. That problem may go underground again and that is my concern. Until we equalise the duty between green diesel and road diesel, it will always be a problem and it always has been a problem. We should try to fix that fundamental issue, equalise the duty, make it cash neutral for farmers to ensure they do not lose out financially and then get cross-Border co-operation in regard to the flow of duty.

Mr. Stephen Lynam

I would add a further point on the subject of ancillary purchases. If a person sources a product on the black market as opposed to the legitimate retail chain, it results in the loss of ancillary purchases in that a person who purchases a packet of cigarettes in their local store would also probably also purchase a newspaper or some other small items. When the legitimate retail chain is taken out of the picture for the main product purchased, be it cigarettes, there is a loss of ancillary product purchases and the State also loses out on revenue from those sales. Similarly, if a person decides to source cigarettes or counterfeit clothing from a man with a white van who drives around their estate, once that customer is in the bag, so to speak, that criminal can knock on that person's door and sell everything else. There is anecdotal evidence to suggest that in some areas, perhaps socially deprived parts of our cities, entire shopping lists are being sourced through criminal acts. We are seeing that through the increase in shoplifting. Although the main purchase may only be one product, there is the potential for an explosion in those sales once the criminal gang or element has its foot in the door and the State can lose out in a much bigger way.

Chairman

I have a few questions before we wrap up the discussion. To return to the point Mr. Frank Gleeson and Mr. Stephen Lynam made, their report shows that the potential loss here is close to €1 billion. If we implemented all their recommendations, how much of that lost income could be recoup? I am conscious they cannot solve every problem. Do that have a figure for what could be achieved by implementing the recommendations in their report? There is no doubt that jobs have been rapidly lost on foot of this and we are losing out on the opportunity to create jobs. What level of job creation could be achieved if the recommendations in the report were implemented?

Mr. Tony Hickey spoke about a link in this context. Is it fair to say that there is link in that the revenue from the relatively light punishments imposed for the illegal sale of tobacco products and alcohol smuggling is being used to fund the addressing of other issues of criminality?

Mr. Tony Hickey

Absolutely.

Chairman

That is another reason to tackle this problem. This crime is widespread throughout the country and not only prevalent in a city, on Talbot Street or on any street. The report Mr. Tony Hickey mentioned refers to Meath, Kildare, Waterford city and Limerick. Every county gets a mention when it comes to these reports. What is driving this problem? Is it the current economic situation, was it happening in any event or is organised crime on a roll? I am trying to get my head around the scale of the problem in order that we can focus in on trying to solve it

Mr. Hickey said that there were 23,000 inspections in regard to the sale of tobacco and very few convictions. This is about targeting resources. I am not saying we should not target the sale of tobacco but it is about striking a balance. I read recently there were 2,000 inspections in regard to the sale of eggs and there were more than 700 on compliance in terms of the plastic bag levy. There has to be a cost to all of these inspections. Retailers who have appeared before the committee on numerous occasions have said that they are fed up of red tape and being chased up about the sale of eggs. We need to get real and establish what is the issue. There must be a cost to the carrying out of these inspections. Do the representatives have the figure for costs? If those resources were used in a more balanced way or spread around more areas, perhaps some progress could be made. Are there inspections of markets where many of these products are sold? Mr. Tony Hickey said we inspect the licensed premises but it is the trade in the unlicensed premises we are trying to catch. Are the unlicensed premises inspected? I would welcome Mr. Tony Hickey's comments on that.

On the issue of fuel and a fuel rebate, the transport committee has dealt with this issue as have other committees. A big issue in this context is that farmers are concerned that they could be left waiting for cash. Mr. Frank Gleeson mentioned earlier that we should have a solution to this issue before we would proceed on this. Does he have a solution or how can that problem be eased?

The Road Haulage Association has been working with the cross-departmental group and the finance group to secure a rebate on their fuel costs. It would claim in its report, and I read through it, that there are massive savings to be made. It can show that less money would be spent abroad legitimately and that its members would buy their fuel here if there was a rebate facility in place. It would be a self-financing measure and that it would result in there being more jobs and more taxes would be paid. Would Mr. Frank Gleeson back up that claim and does he believe it is right? Has he a view on it from his own position rather than from the position of Retail Ireland? I would like to hear his thoughts on that. Those are my questions and I might ask some more later.

Mr. Frank Gleeson

That is a comprehensive list of questions and I will attempt to deal with the ones I managed to jot down. What is driving this is organised criminals seeing an opportunity, as they move out of other activities into one in which they believe there is easy money. Fuel laundering and the tobacco trade are easy money, the fines are relatively low and the profits are relatively large. Also, demographics is a factor. There is no doubt that in a recession people who smoke have less money in their pocket to buy a packet of cigarettes, so the attractiveness of buying a packet of cigarettes for €4 versus €9 is significant. My problem with that is that this loss is being experienced by the corner shop which relies of those people's footfall to buy a newspaper and a bottle of milk. It is not the Tescos of this world but the small stores I am worried about - the stores Senator Feargal Quinn has visited as he has tried to help the local towns and villages that are dying.

On the question of what would happen if we implemented everything in the report, I will pick two categories. If everything in our recommendation to address fuel laundering was enacted, it could be eliminated completely because there would be no opportunities and that would result in the pretty straightforward recoupment of €150 million. On the illegal sale of tobacco, if one takes the figure of €500 million, which is I believe is the right number based on my experience as a retailer and from dealing with this issue in recent years, and if the incidence of it was reduced from 30% to 20%, that would result in significant savings of hundreds of millions of euro. Instead of a €500 million problem, it would become a €20 million problem and we would get back €300 million or €400 million. That is a big number also. Some of the other issues such as shoplifting and theft are a little more difficult to address. They account for a 1.4% loss of margin. The best levels I have seen are less than 1%, about 0.4 of 1%, which is probably about €50 million maximum.

In fairness, the Garda Síochána has issued a fantastic report, but the retailers and the Garda need to implement it. There could be a saving of 50%. The report, Tackling the Black Market and Retail Crime, puts a figure of €62 million on the loss generated by the sale of counterfeit goods. I believe that is an underestimate and that the figure is much higher. If one goes to any market around the country, one will see counterfeit products. The volume of counterfeit digital goods is significant. I do not know how many songs are downloaded illegally - Mr. O'Grady Walshe could answer that question - but very few are bought legally. We are trying to support the film industry with tax incentives, yet we are not enforcing the law on counterfeits as people are downloading products directly off the Internet, which should be relatively easy to stop. I do not have exact statistics, but there would be a prize of between €400 million and €500 million if everything to combat the sale of goods on the black market was implemented. That is a great deal of money. Much of that money will flow directly to the Government and the benefit of those goods going through the suppliers' chain to retailers would be double that again.

Chairman

Would Mr. Gleeson be able to estimate the number of jobs that would arise from doing this?

Mr. Frank Gleeson

My colleague, Mr. Lynam will respond to that question.

Mr. Stephen Lynam

We did not make an estimate. We thought about hypothesising the amount of money that would generate X number of jobs, but we steered clear of that. To develop Mr. Gleeson's point, if a multiple of €500 million were to go into the retail sector that would solve a great many problems in the depressed retail market and would create tens of thousands of jobs.

Mr. Frank Gleeson

In response to the question on farmers, we are clear that the scheme would have to be cash-neutral to the farmer. We do not want farmers to be penalised. The Government, farmers and retailers must put their heads together to figure out a rebate system that makes sense. It could definitely be done if we wanted to do it, but there must be a desire to fix it. I do not want to see disincentives for farmers. Ultimately the Government may face a small adjustment, but it is peanuts compared to the actual value of €150 million.

Mr. Stephen Lynam

It will be a cashflow issue for the State, as opposed to a cost issue. There may be a cashflow issue for one or two months but the money recouped by closing down that market would be made back in six months.

Mr. Frank Gleeson

The road hauliers are putting forward the view that there is fuel tourism from Ireland to Europe. I do not think they are referring to the United Kingdom as I believe the traffic is coming from the United Kingdom to buy fuel in Ireland. If the differential between the Republic and Northern Ireland is off, fuel tourism will turn around immediately. This applies also to alcohol and tobacco. We are a little bit off against the Benelux countries; anyone coming across in the ferries from those countries is more than likely to fill his or her tank over there. I do not know what estimate is used, but it sounds as though this would be a self-financing measure; however, it would have to be reviewed after a period to see whether the figures have actually come through, because it is based on estimates.

The other figures I put forward are based on information that we know is available on the market.

Chairman

It would be helpful if the energy retail industry could do a detailed comment on the Irish Road Haulage Association report because we are trying to influence a major decision on energy costs. Our motivation is job creation and tax collection. One assumes the measure would be self-financing. The association has done a great deal of work but it would be good to have the view of Retail Ireland on it as well.

A number of questions have been addressed to the Garda and I ask Mr. Tony Hickey to respond to them.

Mr. Tony Hickey

On the question of the supervision of the legal trade, we can supply the joint committee with the figures when we collate them. It is not a criticism of the people that are doing what they are paid to do, but there seems to be an imbalance. Much of the illegal trade is underground and covert. I just wished to make the point on the perceived imbalance.

Chairman

Mr. Hickey mentioned the intention to introduce plans for tobacco and to change the design on the boxes and so on. There are always pros and cons to most of these suggestions and changes.

Mr. Tony Hickey

Absolutely.

Chairman

How do we get it right?

Mr. Tony Hickey

What jumps out is the level of sanctions and penalties and the risk involved in the sale of illegal cigarettes compared to other forms of criminality.

Senator Mary M. White

The point was made that when the budget of the Road Safety Authority was increased substantially and key people such as Mr. Noel Brett were employed, it then delivered the goods. It is obvious that resources and personnel must be put in place to solve the problem.

Mr. Tony Hickey

The improvement in road safety is due to the combination of extra resources, relevant legislation and education. The message has got through to people. Members will be aware that most young people have a different attitude to driving when they have taken alcohol.

Chairman

Do members have any further questions? Deputy Dara Calleary sent his apologies; he had hoped to be present because this is an issue on which he has been focusing, together with Senator Michael Mullins and myself. We want to work on this issue. The Retail Ireland report brought it our attention and helped us to focus on this issue. Our plan is that we will host meetings around the country to try to engage with people who have been affected by retail crime and the sale of black-market goods. We will listen to their ideas and solutions and engage with the other Ministers to try to bring their Departments to focus on this issue. We will not solve the whole problem, but it would be silly not to try. Jobs are at stake and if we succeed in tackling the problem, we could generate money that would mean other cuts and changes were not necessary.

I thank the delegation from Retail Ireland for focusing our attention on this problem. We will engage further with Retail Ireland and Mr. Hickey in the next couple of months. We will meet members of Retail Ireland at their regional meeting in Kilkenny.

Mr. Stephen Lynam

Neither Mr. Gleeson nor I will be at that regional meeting on Monday, but Retail Ireland members from a number of companies will be able to speak about their experience.

Chairman

We will travel to Kilkenny and Waterford next week and we hope to go to different places around the country in the next six months. We will try to engage with the local members of Retail Ireland when we visit these places. We will invite organisations from across the board to these meetings. We should then get the views of a good representative body, which will help us in our work.

The joint committee adjourned at 11.25 a.m until 1.30 p.m. on Tuesday, 20 November 2012.