JOINT COMMITTEE ON JUSTICE, EQUALITY, DEFENCE AND WOMEN'S RIGHTS debate -
Wednesday, 17 Feb 2010

Tobacco Smuggling: Discussion.

Chairman

I welcome Mr. William Hanley and Mr. Benny Gilsenan from Retailers against Smuggling and Mr. John McCormack and Ms Kathleen O'Meara from the Irish Cancer Society. We all know Ms O'Meara but it is unusual to see her sitting on that side. I welcome Mr. Chris Macey from the Irish Heart Foundation and Dr. Angie Brown from ASH Ireland.

It is recognised that smoking tobacco can have serious health implications but that is a matter for another forum. Therefore, although I understand there will be references that relate to health the committee will focus on what can be done to address smuggling. In the joint submission from ASH, the Irish Cancer Society and the Irish Heart Foundation, I note there are references to sentences imposed by the Judiciary. It is not the practice of parliament to discuss decisions or comments of the Judiciary because of the separation of powers. We should avoid doing that in so far as possible. We have seen the information that was circulated and perhaps we can leave it at that. I thank the representatives for the submissions made to the committee on this matter.

The format for today's meeting will be that each group will make an opening statement and this will be followed by a questions and answers session.

Before we begin I draw the attention of the representatives to the fact that members of the committee have absolute privilege but the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

I invite ASH Ireland, the Irish Cancer Society and the Irish Heart Foundation to make their joint statement. Mr. John McCormack will begin.

Mr. John McCormack

Thank you. On behalf of the Irish Cancer Society, the Irish Heart Foundation and ASH Ireland, we are very pleased to have this opportunity to address the committee on the important issue of tobacco smuggling. There will be brief submissions from the three organisations dealing with smuggling, what needs to be done, the cost of doing nothing and some reference to the health consequences. Without any further ado, I will hand over to Mr. Chris Macey, head of advocacy in the Irish Heart Foundation.

Mr. Chris Macey

We are concerned about the health impact of tobacco smuggling. Some 7,000 people per year are dying in Ireland from smoking. Tobacco related illness costs the economy an estimated €1 billion annually. It is believed that 20% to 25% of cigarettes smoked in Ireland are smuggled and lost tax revenue is costing the Exchequer at least €400 million each year. Availability of these cheap cigarettes leads to greater consumption. Also, it is generally recognised that to reduce smoking levels, one must simultaneously address the issues of tobacco tax, smuggling and smoking cessation activities. If one falls down on one of these areas, one fails. This is evidenced by the fact that after the workplace smoking ban, smoking rates among the adult population fell from 29% to 23%, but are now back up at 29% again. Some 35% of 18 to 29 year old people are smokers.

We disagree that smuggling is a product of high tax and we can point to many examples of countries with high tax and low smuggling, low tax and high smuggling or where smuggling rates declined dramatically after tax increases were combined with better enforcement. We agree with the World Bank, the World Health Organisation and the EU anti-fraud office, OLAF, that the main drivers of tobacco smuggling are the tobacco industry's role in facilitating smuggling, unlicensed distribution, lax anti-smuggling laws, weak enforcement and the existence of entrenched smuggling networks.

In Ireland, the Customs and Excise and the Garda are doing a great job with insufficient resources. Until the start of 2010, there was only one mobile container scanner for the whole country and our second patrol boat was only secured last year. However, if one omits the State's largest ever seizure at Greenore, County Louth, the number of smuggled cigarettes recovered last year was lower than in 2008. The efforts of the Customs and Excise and the Garda are being undermined by sentences handed down in the courts. In the three years to June 2009, fines totalling €160,000 were imposed on 340 people convicted of smuggling or the illegal sale of cigarettes. Only nine people were sent to jail and seven people received fines of more than €2,000. The largest fine handed down was €7,500. By comparison, in the North a fine of £729,000 sterling was imposed on a single case in 2008 and a penalty of $11 million was imposed in a case in Australia involving 1 million cigarettes. Maximum fines here for lower levels of smuggling are being increased in the Finance Bill tenfold, from €12,000 to €126,000 and for amounts in excess of €250,000, the maximum fine continues to be three times the value of the contraband. The maximum prison sentence is five years. These penalties are not insignificant, but sentences must be severe enough to act as a real deterrent to large-scale international smuggling gangs.

International law enforcement agencies maintain tobacco smuggling by crime syndicates is being used to finance international terrorism, arms trafficking and the trafficking of women and children. Given the dangers involved and the people behind much of the smuggling, society must begin to take this issue more seriously and to treat tobacco smuggling with the same seriousness as drug smuggling. I will now hand over to my colleague from the Irish Cancer Society to address the specifics of what we believe the authorities should do.

Ms Kathleen O’Meara

I thank the Chairman, members of the committee and my former colleagues. It is nice to see everyone again. In the words of the current Minister for Finance, Deputy Brian Lenihan, tobacco smuggling has reached epidemic proportions in Ireland. Nothing short of a national anti-smuggling initiative by the Government will tackle it. This is why we are here today as well as to ask the committee to take on this very urgent issue. We call on the members of the Joint Committee on Justice, Equality, Defence and Women's Rights to take on this very important issue. At this stage it is an urgent issue and we call on the committee to use its good offices to either urge the Government to develop a national anti-tobacco smuggling strategy or to develop one itself and then present it to Government. This is urgent and the time is now.

Illegal cigarettes are freely available, they are sold openly on streets, they are traded from vans in housing estates throughout the country, they are being sold in shops and are openly available in open markets throughout the country. Anecdotal evidence from Members, not of this committee but other colleagues, suggests that criminal gangs trading in illegal drugs have expanded their range of activities to include trade in illegal cigarettes because it is now so profitable and rewarding. Another reason is that it is easy to do so. Given the low penalties and enforcement, the risk involved to these criminal gangs in smuggling illegal cigarettes into this country is low, but the rewards are great.

Nothing short of a national initiative is needed to tackle this issue. Let us consider the countries tackling this issue, such as the United Kingdom, Spain and New Zealand. The issue is set out in a very detailed way in our submission to the committee. It can be seen that only when all the agencies of the State come together to fight tobacco smuggling do they succeed. This is why we are here today. We have also met the Ministers for Justice, Equality and Law Reform and Finance. We have lobbied extensively and we have attempted to bring this issue to the attention of many Members and other agencies.

Our submission sets out a comprehensive plan to tackle tobacco smuggling. While I do not intend to go into detail, I refer to some elements of it. One such element is the need to devise a national anti-tobacco smuggling strategy. Increased resources for detection and surveillance activities must be provided. Such resources include more officers at ports, more resources for the Garda and more resources for the Director of Public Prosecutions so that this issue is tackled comprehensively. We trust this will happen inevitably and we wish to see this leading to a greater number of prosecutions. Therefore, the office of the Director of Public Prosecutions must be adequately resourced to make this happen. Additional detection and enforcement staff are required and this should be combined with the prospect of legal and financial penalties for the industry. These are among the increased resources we wish to have provided.

I refer to enforcement of penalties. Introduction of on-the-spot fines for individuals smuggling or selling illegal tobacco products should be considered. There is a distinction to be made between large criminal gangs and individuals who smuggle large amounts of illegal tobacco through our ports and airports. On-the-spot fines at ports and airports and the provision of increased resources, including the increased visibility of Revenue staff at our airports and ports, would make a difference and send a strong signal that the Revenue Commissioners, on behalf of the State and the taxpayers, takes the issue seriously and makes a distinction between personal use and other use. This would be a very simple measure and would make a great difference. It would also ease the burden on the courts in terms of processing these prosecutions. I refer to the introduction of penalties directed at tobacco companies whose products are smuggled. We need increased co-ordination of activities at European level to tackle smuggling. As an island we are very exposed. The Greenore operation that resulted in a huge haul of cigarettes last year was targeted at the UK rather than the Irish market. However, Ireland was being used as an easy port of entry.

I refer to the integration of all anti-smuggling initiatives. We seek public awareness campaigns because while there is acknowledgement abroad that cheap, illicit, illegal cigarettes are available, based on evidence abroad, we believe when it is brought to the public's attention the public will make a distinction between legal cigarettes on which excise and duty has been paid and those on which they have not been paid. Most citizens are law abiding and have no wish to be used by criminal gangs or to be complicit in illegal activity. We need to bring this issue to the attention of the public. The media is doing so but the Government must do so as well. We call on the committee to ensure Ireland complies with the framework convention on tobacco control. This is a very important and powerful treaty drawn up by the World Health Organisation which requires the Government to comply in a particular way with regard to a relationship with the tobacco industry and to ensure particular measures are taken in respect of smuggling. It is very important that Ireland complies with the framework convention on tobacco control. These measures have been set out in more detail in our submission which all of the members of the committee, whom I thank, have received. I will hand over to Dr. Angie Brown from ASH Ireland to take up the case.

Dr. Angie Brown

I thank the committee for the opportunity to talk here today, in particular as this is an auspicious day, national no-smoking day, a fact of which I am sure the committee is aware. ASH is in complete agreement with the Irish Heart Foundation and the Irish Cancer Society. It is deeply concerned that smuggling is flooding the market with cheap tobacco. This will lead to an increase in prevalence of availability, particularly for children and teenagers who are very price-sensitive. Price is also a major factor in encouraging adults to quit. As the committee knows, all cigarettes are highly dangerous as they contain more than 4,000 chemicals and carcinogens. Nearly 7,000 deaths per year occur as a result of tobacco-related disease in Ireland, which is a figure far higher than the numbers killed on the roads. Cheap cigarettes will lead to a continued increase in prevalence and, therefore, an increase in mortality and, importantly, morbidity. We will have more ill-health which will consequently increase health care costs and further stress an already overstretched health service. We therefore need to address smuggling as a matter of urgency.

To this end, it is important that all of our initiatives on tobacco smuggling are strongly pursued. Although we expect the tobacco industry to comply with the law, the industry has a vested interest in increasing prevalence. In the past it has been implicated and fined for tobacco smuggling as this has the potential to increase prevalence, addiction and, hence, its profits to the detriment of the health of the population. As we mentioned, the framework convention for tobacco control, to which the Government is a signatory, restricts Government interaction with and lobbying by the tobacco industry. It advises governments to enact or strengthen legislation, with appropriate penalties and remedies against the illicit trade in tobacco products, including counterfeit and contraband cigarettes. In other words, it is very important that we stamp out smuggling and that these discussions are done without the tobacco industry in order that we are in accordance with the framework on tobacco control. We hope further efforts to reduce smuggling will increase revenue from tobacco excise duty. We call for some of this revenue to be ring-fenced for smoking cessation programmes, education programmes, maintenance of the smokers quit line and access to nicotine replacement therapy.

To summarise, the Irish Heart Foundation, Irish Cancer Society and ASH Ireland think the actions of this joint committee can have a significant and lasting impact. We would like to see a strong national anti-smuggling strategy maintaining and enhancing close links and co-ordination with relevant international bodies. We would like to see increased resources for detection and surveillance, enforcement of penalties for tobacco smuggling and illegal selling of tobacco and the introduction of penalties for tobacco companies whose products are smuggled. We would like to see tobacco-related crime being treated in the same way as drug smuggling, with appropriate alterations to legislation if necessary. We would like to see a public awareness campaign to highlight the penalties for smuggling or selling illegal cigarettes, as well as the health effects of smoking and the advertisement of a confidential freephone number to report such illegal activities. We would like to ensure compliance with the framework convention for tobacco control and to see increased funding for cessation and education programmes.

Mr. William Hanley

I thank the Chairman and members of the committee for the opportunity to appear before the committee today. As the Chairman said in a press release yesterday, cigarette smuggling is currently a major problem in the country. It affects retailers from a sales point of view. It is estimated that we are losing sales of some €1 billion, which comprises cigarettes and add-on sales. People are not coming into our stores to buy cigarettes. Some shops have experienced men standing outside their doors with carrier bags containing cartons of cigarettes, which they are pushing on customers. Even if people do not want to buy cigarettes, they are being offered them, which is dangerous.

The Exchequer, as it admits, is losing some €400 million — we would estimate the figure as slightly more than that. The Exchequer cannot afford to lose that amount of money in the current climate because €400 million or €500 million is some 1% of the total revenue collected last year. For retailers, each cigarette bought on the street affects jobs in our shops. More than 10,000 jobs have been lost as a result of smuggling so far and, day by day, the problem is getting worse. As retailers, we work under legislation and have to have a licence to sell cigarettes. The Office of Tobacco Control controls everything about our cigarette sales. If we are caught selling to a minor, selling smuggled tobacco products or anything like that, our licence is taken immediately and we cannot sell cigarettes for an initial period of three months and large fines are imposed upon us.

Yet, traders are in markets, on the streets and calling door-to-door. We have copies of advertisements which have been put into letter-boxes with mobile numbers one can call to have cigarettes delivered, which is a fantastic service but involves an illegal product. We are licensed to sell a legal product. Smuggling has to be tackled. We are looking for joined-up thinking between customs, the Garda and the Office for Tobacco Control, who need to get together and tackle this issue in a joined-up manner.

Last year the average fine imposed on people who were caught smuggling tobacco products was €527. While the maximum fine at the time was more than €12,000 it has now increased to more than €126,000. The justice system needs to impose real fines and not something minuscule.

Chairman

Mr. Hanley, I do not want you refer to the Judiciary. It is a matter for it to impose whatever fines it decides.

Mr. William Hanley

I apologise for mentioning the Judiciary. We are asking for larger fines and jail sentences to be imposed. We are looking for public awareness to let the public know that the people selling cigarettes in markets and on the streets are selling an illegal product which does not support jobs in shops or the Exchequer.

Mr. Benny Gilsenan

In the small trade sector, of which I am a part, cigarettes constitute 30% to 40% of the overall business which is being eroded to a phenomenal extent at the current time. In the north inner city, where I am located, cigarettes are being sold door-to-door on a continual basis. They are not being sold by big-time criminals; rather, they are being sold by 12 and 14 year olds. The law has no part to play in this. If a garda arrests a 12 year old with 200 cigarettes and brings him or her to court, the judge, invariably, will let him or her off because he or she is a minor. The criminals are using young people to off-load their loot and until such time as the law deals with this issue in a proper manner, we will not see any reduction in the sale of illegal cigarettes in the marketplace.

Deputy Charles Flanagan

I acknowledge the importance of the meeting and thank the delegates for their realistic and significant contributions. For the first time this committee could be described as a coalition against tobacco smuggling and it is significant that people who are implacably opposed to the consumption of tobacco and people whose stock in trade is the sale of tobacco are united in something of an unholy alliance. It is important to address the issue and I am sure the documentation we have received will go a long way towards assisting the members of the committee. I do not wish to add anything to the contributions which have been made. This is an issue which has been raised in this committee and on the floor of the House. I welcome the increased penalties recently announced in the Finance Bill although I accept what Mr. Hanley has said that there is not much point in having very high and prohibitive penalties if they are never imposed.

On the issue of smuggling, and accepting that there are finite resources in terms of customs and Revenue, it is important to undertake an audit to ascertain how thin on the ground are inspectors, having regard to the fact that customs and Revenue roles continually overlap. For example in the BMW region, which comprises in excess of 50% of the landmass of the State, there are very few people on the ground engaged in anti-smuggling operations. The recent cutback gave rise to a situation where there are fewer inspections and less likelihood of being apprehended which will assist very much in the smuggling epidemic.

I would like to see the law enforced in a way that it is not enforced currently to deal with illicit tobacco trade most of which appears to be done in housing estates and on streets involving people with cars and vans distributing the product. I ask Mr. Gilsenan and Mr. Hanley to comment. I have heard anecdotal evidence that a white vans pulls into a housing estate after dark and operates almost as a market stall. As part of the penalty, I would like if the driver was suspended and the driving licence endorsed on the basis that driving, or travelling or the use of a mechanically propelled vehicle is part of the criminal activity. In the case of those engaged in smuggling, as well as being subjected to a fine and the confiscation of the smuggled goods, it would be open to the courts by way of order not only to endorse the driving licence but to suspend the driving licences of those involved. That might have an impact.

Ms Kathleen O'Meara referred to the Framework Convention on Tobacco Control. Perhaps she would elaborate on our obligations in that regard. It appears that as part of the conference of the parties we have agreed in principle to engage. Perhaps she will inform the committee on what this engagement actually means and identify areas where there is an apparent, if not an actual, conflict of interest on the part of the Irish Government and officials in the matter of the framework convention. Is there evidence of any form of a partnership agreement between Government and the very powerful tobacco industry that might in some way conflict with the framework convention? Is there anything that we as legislators might do to increase or copperfasten our engagement on the matter of legally binding anti-contraband, anti-counterfeit agreements worldwide? On the matter of EU agreements that may well have an impact on our national legislation, what is the position in terms of ratification of our own national legislation or treaties with other states? It is clear that the first thing we need to do is to avoid conflict of interest in the Government's agreements with the tobacco industry.

Everybody is very welcome here. This is an important issue. I am sure that the Chairman will ensure, in his capacity as Chair of this committee, that we will not only revisit the issue but act on the recommendations as furnished and will report to the appropriate Ministers.

Chairman

The Deputy has raised some important questions. I invite Mr. Hanley to comment on what has been said in regard to the endorsement of licences.

Mr. William Hanley

Yes, Chairman. In regard to the people on the streets selling cigarettes, evidence will show that at times they must have a mode of transport. I welcome the suggestion that they lose their licences or that their licences are endorsed in the event that they are caught with the cigarettes. Many of the people bringing in large amounts of cigarettes, smuggled tobacco products, will send runners out on the street, possibly under age kids. They will not be caught in possession of huge amounts of tobacco. The best way to tackle this issue is to ensure that large fines are imposed on so-called runners to deter them from getting involved in this activity in the first place. As Retailers against Smuggling that is the approach we seek. One could search for the big guys forever and the problem only continues to increase. We need a deterrent to ensure they do not have the runners available on the street.

Chairman

What about the framework convention?

Ms Kathleen O’Meara

I thank the Deputy for raising this important matter. The Framework Convention on Tobacco Control, FCTC, is the first treaty that was negotiated under the auspices of the World Health Organisation. It was developed specifically in response to the globalisation of the tobacco epidemic. The tobacco epidemic and the tobacco smuggling epidemic is a feature of globalisation and Ireland is not alone and clearly cannot act alone in combatting this problem. There is no question but that we are a target which is the reason we are appearing before the committee seeking a very strong response from the Government because it is needed. We cannot afford to be complacent about this issue any more. We are clearly a target. It is part of a worldwide problem but we are particularly weak considering that we are an island and also because we are not doing enough. It is clear the UK, Spain and New Zealand have achieved a good deal, but particularly the UK and Spain, because they are partners in the EU and when they took on this issue seriously they managed to reduce the level of tobacco smuggling. When a Government announces a particular set of initiatives, a very strong signal is sent out to tobacco smugglers that the country cannot be taken for granted and is no longer an easy target. We think that signal has not been clearly been sent out.

The framework convention was established in 2005 and has become one of the most widely embraced treaties in the world. Ireland is a signatory to that convention. Principle 1 states: "There is a fundamental and irreconcilable conflict between the tobacco industry's interests and public health policy interests." We are not appearing before the committee to discuss health policy and we are very clear on that. However, in regard to this framework on tobacco control, one cannot separate the two issues. As the principle states there is a fundamental and irreconcilable conflict between the tobacco industry's interests and public health policy interests. It therefore urges parties to avoid conflict of interest for Government officials and employees.

We know, and my remarks will be general because I am clear on the rules, the tobacco industry worldwide does everything it can to undermine Government efforts with regard to tobacco control. We know it lobbies in the background and in the foreground using reputable companies and reputable organisations and does everything it can to undermine public policy with regard to tobacco because it is a huge industry and obviously major profits are at stake. Part of the framework convention, therefore, commits Governments to ensure there is no conflict in terms of its actions or interaction with the tobacco industry. We do not see the tobacco industry as being like any other business. We do not see it in the same way we see agriculture, the construction industry or anything like that and therefore the normal lobbying rules do not apply. Members of this House will meet representatives of many sectors but it is not acceptable, particularly for Governments, to meet representatives of the tobacco industry, and that is largely the principle of the framework convention. Our submission refers to that and we can provide much more material on it but I thank the Deputy for raising it.

To give one example because the Deputy asked the question, Philip Morris International, for instance, has reported meeting 2,800 government agencies and 8,000 government employees to promote its own system for tracking and tracing cigarette products. One of the aspects of the tobacco industry we are concerned about is that it pretends to be as against tobacco smuggling as health charities and lobby groups but it is not because there is evidence, particularly from the United States and internationally, of tobacco companies being fined very large amounts of money for being complicit in tobacco smuggling.

We are also a party to legally binding anti-contraband and anti-counterfeit agreements at European level. We are party to what are called memorandums of understanding under which tobacco companies, if their product is found in illegal settings or so-called legal cigarettes are part of illegal hauls, must pay a fine. In terms of the payments received to date, including to the Irish Government, since these memorandums of understanding were agreed, more than €900,000 was received in 2008 in respect of fines relevant to 2007 from JTI, which is an international tobacco company. Similarly, in 2008 large amounts were received also from JTI in respect of fines, which we would see as evidence that this particular company is complicit in tobacco smuggling. The total figure is €3 million and the 2009 figure, which is only recently available, is €900,000.

Deputy Charles Flanagan

JTI?

Ms Kathleen O’Meara

JTI.

Deputy Charles Flanagan

Gallagher's?

Ms Kathleen O’Meara

Gallagher's cigarettes, yes.

Deputy Charles Flanagan

The overall group.

Ms Kathleen O’Meara

Japan Tobacco International.

Deputy Brian O’Shea

I welcome the various organisations represented. I have a particular interest in this area because a long time ago when I was Minister of State at the Department of Health I had responsibility for the anti-smoking campaign, although I realise that is not the angle we are coming at today.

In terms of the sale of illegal cigarettes, it has always struck me that it is somewhat akin to the sale of cocaine for so-called leisure use in that people do not appear to make the connect between purchasing the illegal product and the fact that the proceeds are going to some of the most dangerous people this country has ever known.

On a few specifics, Ms O'Meara has just spoken about the framework convention for tobacco control and indicated that it is unacceptable for senior civil servants, and public representatives, to treat the tobacco industry in a way other than at arm's length. She used the word "unacceptable". Is this an unacceptable or an illegal practice under the convention? She might clarify that point for me.

In regard to the view many of us hold that Ireland appears to be a target for smugglers because of the high price of cigarettes here, the representatives' organisations lobby for increases in the price of cigarettes. Are the two things compatible?

The representatives also argue that increasing the price of legal cigarettes is not a factor here. We got a clue in that the large Greenore seizure was not meant for this market but for the United Kingdom market. Where does the logic lie? Is the high price of cigarettes making more people buy illegal cigarettes and if that is the case, why does the lobbying for higher prices continue?

Mr. Hanley mentioned the issue of children being used to peddle illegal cigarettes in the open market. Is that part of the strategy of smugglers to avoid prosecution? How extensive is the practice of using children?

I understand there is a legal agreement between tobacco companies and the European Union whereby tobacco companies must pay a fine for cigarettes produced by them which turn up without excise duty being paid on them, that is, having found their way on to the illegal market. Do the representatives know how much money has been paid to the Irish Exchequer arising from that agreement? Does it indicate to them that at some level tobacco companies are encouraging smuggling? In other words, how complicit are tobacco companies in this illegal trade? Is there real evidence of this happening here?

Chairman

I will call Ms O'Meara first. I am not trying to restrict what she might say but I remind her that unlike the members she does not have privilege here of which I am sure she is well aware.

Ms Kathleen O’Meara

Indeed I am, Chairman. I and my colleague, Chris Macey, will jointly take these question.

Regarding the framework, Article 5.3 of the framework instructs ratifying countries, and we are a ratifying country, to "establish measures to limit interactions with the tobacco industry and ensure transparency of those interactions that occur". It also recommends that treaty parties reject partnerships and non-binding or unenforceable agreements with the tobacco industry.

We would want to ensure that senior officials of every Department — Finance, Enterprise, Trade and Employment, Health and Children and so on — are fully aware of the principles and the requirements under the framework convention on tobacco control. We have some concern that this might not be the case and it is one of the reasons we raised it today.

On the European wide agreement, the memorandums of understanding, I quoted those figures already in response to Deputy Flanagan. In 2008, more than €900,000 was received. In 2009, more than €900,000 was received——

Chairman

Was that one company or——

Ms Kathleen O’Meara

In total, the figure is almost €3 million.

Chairman

Yes, but was that from one company or was that the total?

Ms Kathleen O’Meara

It is from JTI.

Chairman

Just one company.

Ms Kathleen O’Meara

Just one company. There are a particular set of measures called memorandums of understanding, which are a relatively new development across the European Union, whereby if the products of a tobacco company — in this case JTI — are, as Deputy O'Shea has pointed out, found in illegal settings they must pay a fine.

Deputy Noel Treacy

To the member state.

Ms Kathleen O’Meara

To the member state. We see that as a good indication of tobacco companies being complicit in smoking. I will hand over to Mr. Macey.

Mr. Chris Macey

On the issue of whether high tax leads to smuggling, we strongly believe that is not the case. In a number of countries prices increased at the same time enforcement was increased, and that has resulted in a reduction in smuggling. Spain, for example, had a smuggling rate of 16% and it increased its resources to combat smuggling from €4 million to €40 million but at the same time the real price increased by 30% and smuggling fell from 16% to 2%. We have several other examples of that, France and New Zealand being two in particular.

Obviously, the tobacco industry is trying to argue for lower taxes to increase its profits because presumably more people would smoke but they say it is the differential among different countries that provides the market. We would say, however, that if that was the case there would be a high degree of smuggling in all high tax countries but that is not the case. Norway, New Zealand, France and Australia are all high tax countries. In Norway there is a 6% smuggling rate. In New Zealand the rate is 1%. It is 3% in France and 6% in Australia. Likewise in low-tax countries, the smuggling rate is high. The World Health Organisation, OLAF, the anti-fraud body, and the World Bank indicate that the tobacco industry's involvement in smuggling practices, weak enforcement of the law and issues such as that are what causes smuggling. Criminals look for the point of least resistance rather than judging where they will make the most profit. This issue is whether they will get caught and, if they get caught, what will happen to them. We know that it is easier to smuggle tobacco into this country than into other countries. Even if one is caught in the process, one only gets a slap on the wrist.

Chairman

Mr. Macey gave percentages of 2%, 6% or higher for smuggling rates in various countries and said the percentage here ranges between 20% and 25%. Where do we rank on the world league of smuggling?

Mr. Chris Macey

The rate in many countries, particularly in eastern Europe, would be higher than here. In countries such as Lithuania, where the price of tobacco is very low, the smuggling rate is 36%. These are countries where the price of a packet of cigarettes is under €1. The smuggling rate in the United Arab Emirates is 30%. We are probably ranked mid-table, but high taxes is not an issue in this respect.

Chairman

Mr. Macey might continue with the other points.

Mr. Chris Macey

I will deal with the tobacco industry's involvement in smuggling. The British House of Commons has done considerable work on this. I will mention three specific cases. In 2004, Philip Morris agreed to pay the European Commission $1.25 billion over 12 years as a settlement and the Commission agreed then to drop smuggling-related litigation against the company. In 2008, Canada's two largest tobacco companies, Imperial Tobacco Canada and Rothmans Inc., pleaded guilty to aiding and abetting tobacco smuggling between 1989 and 1994. Interestingly, the high rate of smuggling in Canada led to a drop in price but because certain tobacco companies were involved in smuggling, the smuggling rate did not fall when the price of tobacco fell. In 1998, a British American tobacco executive was convicted of accepting bribes from a smuggling syndicate in Hong Kong.

Many companies now say that they oppose smuggling. They have two reasons for doing so. One is that they are concerned about the counterfeiting issue. When cigarettes are smuggled, their profits increase because the cigarettes are still being bought from them, but with counterfeiting they lose large amounts of money because they do not manufacture those cigarettes. The other reason for them to oppose smuggling is that they can argue about the link between high tax and smuggling in countries like Ireland and lobby for a reduction in prices.

Chairman

Deputy O'Shea asked how widespread is the use of children is in the distribution of smuggled cigarettes. Would the delegates have further information on that?

Mr. William Hanley

Yes, I will ask Mr. Gilsenan to address that point, but I would like to make a point about the cigarette smuggling issue in Hungary where the rate is high. The price of cigarettes is low in Hungary but in the Ukraine, which is in close proximity to it, the price of cigarettes is a fraction of the price of them in Hungary. That is what is causing the problem for a country like Hungary. A huge price differential is causing the problem there.

Mr. Benny Gilsenan

I will return to the point Deputy Flanagan made. Vans are being used.

Chairman

I would like Mr. Gilsenan to address the question of the use of children.

Mr. Benny Gilsenan

The point I wanted to make will lead on to that. A van is used by a criminal who will park it within a mile of the area where the criminal will offload the cigarettes. The criminal will use children to take the 200 or 400 cigarettes into the area. Given that they will carry a small quantity of cigarettes, the chances of them being caught is much slimmer than if they were to carry a bag containing 2,000 cigarettes. That is why criminals use children to do this. We have photographic evidence of this happening in the Clara market and the Balbriggan market. Such practice is rampant on the Sundays those markets are held. The same happens with the door to door selling of cigarettes. The criminal will park a van in a specific area and use the children to knock on doors and ask the people if they want to buy 200 cigarettes.

Chairman

In practical terms, how does this work? Do the children return with the money and get a commission for doing this work?

Mr. Benny Gilsenan

That is correct. It operates in the same way as the drug scene. I believe it will not be long before somebody will be taken out because he or she is not paying up.

Deputy Noel Treacy

I welcome the visitors from the different organisations, particularly Ms O'Meara, a former colleague. I listened with interest to the discussion and agree with what Deputy O'Shea said. Most of the organisations represented are anti-smoking. Those organisation, including the organisation representing the retail sector, are anti-smuggling. Tobacco smuggling poses a serious challenge for us as an island nation, a point to which Ms O'Meara alluded. The State has deployed considerable resources in this area. The Office of Tobacco Control was created, the law has been amended and powers have been equalised, particularly among the Garda Síochána, Customs and Excise and the military. They have the same powers when they are in a position to chase or pursue people they believe are engaging in illegal activities. That has been provided for in the Customs and Excise (Amendment) (No. 2) Act, which has been in force for a long time.

We have the necessary resources within the State to deal with this issue. It is a matter of ensuring those resources are deployed in an omnibus fashion by the Garda Síochána, Customs and Excise and with military support, if necessary, although that would be using the extreme end of scale to deal with this matter.

We all travel on motorways and on the main roads. Some of us have been known to have been on those roads for particular reasons. I have seen, particularly during road developments in the west in recent years, series omnibus operations deployed by the State agencies to deal with a different type quasi illegal activities against hard-working decent people. These people have been apprehended and some have received serious convictions while others have received minor convictions and perhaps they may have been easy targets.

This issue can be addressed in a number of areas, legislation being one of them. It is important to take account of the fact that we have particular laws in this area. For example, the Carriage of Goods Act makes it mandatory for people to have proper insurance to carry goods. The Insurance Acts make it mandatory for those who are driving mechanically propelled vehicles to have proper insurance for those vehicles, a point to which Deputy Flanagan alluded. Class 1 insurance covers a private vehicle and Class 2 insurance covers the use of a vehicle for the carriage of goods. The law in this area must be examined to ensure serious penalties can be imposed on people who use vehicles for illegal purposes for the illegal purveying and conveying of products. That is one of the area we must examine.

We must also address this problem from an international perspective. There has never been better co-operation between the police on this island, North and South. The co-operation between the new PSNI led by chief constable Matt Baggott and the Garda Síochána led by Commissioner Murphy is excellent. The fact that we have a frontier with Northern Ireland is a major problem in this respect, of that there is no doubt. We must examine what can be done to tighten control there in co-operation with Customs and Excise to make sure action is taken to minimise the activity there.

We may also have to address this issue from a European perspective, in terms of Europol and the European Union. The Union has deployed various border controls in border control offices in different parts of the Union. In addressing this issue perhaps we could seek support from the Union to ascertain if such a measure would be necessary on our frontier with Northern Ireland. European resources may be available that would allow us to track, identify and apprehend these people in a much quicker fashion.

We must also ensure that we use the resources of Interpol. The Garda has been doing that quite well, but the resources of Europol and Interpol should be used to track the criminals involved in this activity across the world. A number of claims have been pursued by smokers in the United States against various tobacco manufacturers, some quite successfully. Consideration was given to that here and a number of people initiated claims, but they did not advance far.

We all have a serious responsibility. The State cannot operate a police or military state. Everybody is responsible in this matter as the State can only do so much. We need evidence and intelligence information to ensure State agencies are alerted to the situation on a consistent basis. However, the law must be updated to ensure that young people cannot be the gullible victims by being deployed to make vast profits for criminals who are involved in illegal activities to the detriment of the Exchequer and the health of the population. This is a serious issue. I respectfully suggest that the committee refer this matter to the Ministers for Justice, Equality and Law Reform, Transport and Finance to have the law reviewed and ask them to raise this issue at the relevant EU Councils so there can be a European wide partnership to minimise this problem and, if possible, eliminate it. However, it is a serious challenge.

Ms Kathleen O’Meara

Deputy Treacy is correct. Ireland has led the way in terms of legislation. It was the first country to implement the workplace smoking ban and has been leading the field in that regard. However, unless we tackle the serious problem of tobacco smuggling, the work of the agencies of the State will be undermined. A serious approach must be taken to the issue. It is impossible to separate the issues of legislation, the work of the Office of Tobacco Control and measures to protect children and so forth. They must all be taken as an integrated whole. Dr. Brown has something specific to say on that.

Dr. Angie Brown

The police have a big problem dealing with organised crime in this regard. It is not a case of getting to the children, who are the end stage of this. We must get to the core of it. The police have an idea of who is behind many of these smuggling rackets but a change in legislation might be required so the police can deal with them. Due to the penalties, there appears to be some reason that it cannot be dealt with in the same way as drug smuggling. We need a change in legislation so we can try to break these organised crime groups.

Chairman

Five more members wish to contribute. Two of them, Deputy Naughten and Senator Jim Walsh, will make their contributions before I return to our delegates.

Deputy Denis Naughten

I thank the delegates for attending this meeting. I apologise for missing the first part of their contributions as I was at another meeting. I wish to make three brief points. Mr. Hanley made the point that leaflets are being dropped into people's letterboxes telling them to ring a particular number to avail of these cigarettes. The Garda can have these numbers blocked by making a request to the telephone operators. There is a similar problem with the issue of prostitution in this country. However, for some bizarre reason, the Garda authorities are not making those requests to the mobile telephone operators. Has anybody brought this to the attention of the Garda and has anybody given an explanation as to why the simple technology that is available to us is not being utilised to try at least to curb the problem?

My second question refers to illegal product as opposed to counterfeit product. It appears from the contributions I heard today that the tobacco companies are complicit in facilitating smuggling because they want to keep the level of counterfeit product down. If they make genuine product available for smuggling, it undermines the counterfeit industry. Will the delegates comment on that? The delegates also made the point that in its Finance Act 2006, the UK introduced penalties for tobacco companies that facilitate smuggling. It appears from the figures mentioned earlier that the money the Irish Government receives through EU structures at present is peanuts compared to the volume of cigarettes being brought into this country. Do we need to revise the legislation in this country or at European level with regard to the level of fines being imposed on companies?

My final point might have been mentioned already but I understand that we have two container scanners at present. I also understand that they cost approximately €2.5 million each to purchase. On the basis of those figures, we could purchase 100 to 150 of those scanners and have them at every crossroads in Ireland if the Exchequer is facing a loss of €400 million per annum due to counterfeit or illegal product being smuggled into this country. Can somebody explain why the scanners are not being put in place? It seems to be Crayola economics, that if the scanners are put in place, the criminals will not use our ports to import the product into this country for distribution either here or in the UK or the EU. If the economics are so simple, why has it not happened?

Senator Jim Walsh

I get the impression that the State authorities are taking a laissez faire attitude to smuggling. Is that a fair assessment of the delegates’ view or am I being over-critical? I would welcome their honest assessment. As is evident in most areas, we churn out a great deal of legislation but much of it is honoured more in the breach than in the observance. Enforcement is extremely patchy in many areas. What do the delegates believe must be done about enforcement by the Garda to ensure greater detection? The delegates said that in New Zealand penalties are applied to those who purchase illegal cigarettes. Is that not the case here? If not, should it be?

The retailers' representatives said that people are selling cigarettes outside the shops and that leaflets are being distributed containing the mobile telephone numbers of the suppliers. Have they brought that to the attention of the Garda in specific cases and what has been the Garda response? Has it led to prosecutions? Have they received feedback from the Garda in that regard? What specific evidence, if any, is there that Ireland is being used as a gateway for other countries? My colleague mentioned the Office of Tobacco Control. Will the representatives comment on how effective or otherwise they consider that office?

A startling item in the report is that the maximum fine here is €12,695 and/or five years imprisonment on indictment. The report states that over three years to June 2009, the accumulated fines amounted to €160,000, which applied to 340 people who were convicted. That is an average of €470 each. That is alarmingly low and certainly merits an explanation. I accept the Chairman's instruction that we cannot criticise the Judiciary, but we certainly will not praise it in light of that. Chairman, it underlines the argument I made at the last meeting on the need for a judicial council. We should be able to ascertain why the fines are so low. It merits a meeting with the Minister and perhaps with the Garda Síochána to follow up this meeting to see that this issue is being taken seriously. There are huge ramifications for people's health, given the potential for this criminal activity to escalate. In addition, there are health issues for smokers. The committee should take a strong, proactive lead in this area.

Chairman

I will come back to Mr. William Hanley first.

Mr. William Hanley

Deputy Naughten and Senator Walsh asked similar questions concerning passing to the Garda Síochána mobile phone numbers of people dropping leaflets at doors promoting the sale of smuggled cigarettes. We have passed on the information, but the problem with mobile phones is that they are readily available in retail outlets, so the numbers are not assigned to a particular name. Most of the time these guys go to ground the minute they become suspicious. They will pick their areas well where people do not report. As retailers, we are probably the last ones to be given the information, and when we get it we pass it on. I have no evidence as to whether the Garda have been successful. Suffice it to say that they respond and ask us to keep passing on the information to them. It is not that they are wiping their hands of the situation, it is just a difficult one to follow.

The scanners were also mentioned and the fact that they can be bought for €2.5 million each. The Exchequer is losing more than €400 million. It seems pretty reasonable that they could buy what they needed and install them in every port and airport. We are on an island, which some might say is a challenge. Equally, however, we should be able to shut down this smuggling. These scanners will not only detect tobacco products, but other things also. It would make sense to have them.

I welcome Senator Walsh's comments on how minuscule the fines are that are handed down. I agree that there must be some action to increase these fines so that there is a real deterrent in place. At the moment there is none. As others have said, those responsible receive a slap on the wrist and are then back doing it again.

The Office of Tobacco Control looks after the retail side of things and ensures that we are compliant. It does not get involved in the illegal smuggling side of things, but that has to happen. The OTC must recognise that this is a real problem and that it cannot put all the pressure on us, the retailers. It must realise that there is a bigger issue out there and the OTC must be part of the joined-up thinking to tackle this issue.

Mr. Chris Macey

Deputy Naughten's question concerned tobacco companies facilitating smuggling to tackle counterfeiting. We do not have any direct evidence of that. Obviously, however, when 115 million cigarettes are seized in Greenore, it is clearly ludicrous for any tobacco company to say that they would not have known about that. To reiterate the point, when smuggling happens tobacco companies profit to a greater degree than ever because the product is cheaper so more people smoke it.

Senator Walsh referred to New Zealand where, between 1998 and 2000, there was a 20% increase in tobacco prices and a 40% increase in funding for tobacco control. The smuggling rate there remained at 1%. New Zealand's population is comparable to ours and it is also an island, so we can take a great deal from that.

Ms Kathleen O’Meara

On the Office of Tobacco Control and the general issue of penalties, members of the committee will recall that ten years ago or more society was more tolerant of drink driving than it is now. Due to debate, serious levels of enforcement and awareness campaigns, public opinion has changed considerably around this issue. Smoking is not the same issue, but in many ways it is fair to say that the level of penalties reflects a certain level of tolerance in the community, which we are concerned about. There are laws and Deputy Treacy was perfectly right to say that considerable resources are available, but we need to see that matched by enforcement.

The Office of Tobacco Control's representatives are absolutely right in saying that they do not have a role concerning smuggling. Perhaps they should be given such a role, but the OTC, as the regulatory agency, has done extremely good work on important issues. These include highlighting the illegal sale of tobacco to minors, which has made a difference. However, the OTC has been a victim of Government cutbacks and the level of staffing available to it has dropped considerably. If there was a question of the OTC taking on additional responsibilities, it would have to be resourced. We have taken up this issue with the Department of Health and Children, although it is not an issue for this committee. We are concerned about the level of resourcing being made available to the OTC. We would like to see vacant posts being filled to ensure that the important work being done by that regulatory agency continues. It has an important legislative function and that should be reflected in the resources being made available to it.

Dr. Angie Brown

On enforcement, although we have resources we probably need further investment and more resources. We need to break up the distribution and supply chain, which may require further increasing the number of scanners and personnel. In the UK, they invested in an additional £209 million and increased their personnel by about 1,000. The number of scanners was also increased. They have managed to cut down the illicit trade by one third since 2000. They have therefore made significant inroads. We need an increase in resources for the Garda Síochána. I agree that we need to do something about the fines because more deterrents are required. If we can be part of that education programme concerning the Judiciary we would be happy to be.

Deputy Jimmy Deenihan

I welcome the delegates to the meeting. I am sure they would agree with the recommendation for a national anti-smuggling strategy. There are so many different Departments that touch on this matter, but they do not seem to co-ordinate their efforts. For example, if the Department of Defence has to intervene concerning a ship under suspicion, it must obtain permission from the Customs and Excise office, and perhaps even from the Department of Justice, Equality and Law Reform. It is a cumbersome process.

We currently have a flotilla of eight vessels patrolling and policing our coastline. That is inadequate. That has been proven with regards to drugs and cigarette smuggling. The Naval Service has lost a number of personnel because of the embargo on recruitment. It even finds it hard to man existing patrols because of that. There must be a major improvement in naval surveillance of drugs and cigarette smuggling. Unless smugglers are operating on container ships, they will not bring their contraband through the main ports. They will use minor ports and small piers around the country. They are rarely policed. That is where much of the counterfeit comes in. That is a known fact. We are dealing with a fairly well advanced network of people. While we have resources, they are not adequate to combat that.

The delegates are here to deal with smuggling but I refer to a related issue. Are more young people smoking cigarettes because we have such a high level of smuggling? Has that been proved? I am amazed by the number of people under the age of 18 who smoke. The delegates have come up with a figure for the number of over 18s who smoke, which is alarmingly high. I have seen people of ten years of age smoking and they seem to be seasoned smokers. These young people smoke legal cigarettes and not smuggled ones. The health message from ASH, the Irish Heart Foundation, and so on must be very much directed at young people as well. I pass a girls' school on my way to work every morning and I am amazed by the number of girls smoking. They are all under 18 years of age. That is another issue and it is not what the delegates are here for, but all these cigarettes are bought locally and are not smuggled cigarettes.

The delegates are here to deal with smuggling cigarettes and are trying to say that from a health point of view, the more smuggling that occurs, the more cigarettes that are available. To combat smuggling, I agree with all the previous speakers that we need more scanners and detection at the smaller ports and airports, although most cigarettes come in by sea in containers. This country has one great advantage in that it is an island. There is a major onus on the ports that are used to land containers to detect what is coming in. Surely there should be a responsibility on Europol or otherwise to ensure there are detection procedures in place in the ports where these people embark. People should be scanned as they embark and disembark.

There should be a national anti-smuggling strategy. There is a role here for the Departments of Justice, Equality and Law Reform, Finance, Health and Children, Education and Science and Transport. Perhaps the committee could suggest this. I suggest the delegates make a similar presentation to the Oireachtas Joint Committee on Health and Children.

Deputy Thomas Byrne

I am delighted we are having this debate. We are very aware of what the retailers are saying and I have been in touch with some of the distributors. I was not aware of the protocol restricting the Government's interaction with the tobacco industry. I knew the Government did not interact too much with the tobacco industry but I did not realise there was a protocol. I would like to familiarise myself more with that.

It is interesting to hear the retailers' point of view but it is also interesting to hear that of the health organisations. I would not have thought they would have presented so many good and original ideas to us on this issue. Much has come from this meeting which we can take further, take to other meetings and on which we can make recommendations to the Minister for Justice, Equality and Law Reform in regard to the legislation, in particular.

We would all like more scanners and I believe there is another scanner in operation. The difficulties in terms of how the scanners operate have been explained to me and the criminals seem to be very aware of the ports in which they are located and where to go and where not to go.

There are some recommendations from the Irish Cancer Society, ASH and the Irish Heart Foundation on tightening up legislation. That needs to be done as a matter urgency. There are some ideas there from the UK, Singapore and New Zealand. Reference was made to the UK Finance Act 2006. Is it correct that we do not have something similar in regard to the legal duty on tobacco companies not to facilitate smuggling? It was stated that in the UK, the Finance Act 2006 made it a legal duty of tobacco companies not to facilitate smuggling. Is there anything similar in our legislation?

Dr. Angie Brown

I will talk about prevalence, being a cardiologist. We are very concerned that prevalence is potentially increasing but it is particularly high in the lower socio-economic groups. These groups are being targeted. It is up to 54% in women between the ages of 18 and 29 in those groups. One sees people selling in dole queues and in housing estates. I have patients who have supplies of cigarettes which are sold to them very cheaply. Not all of these are smuggled cigarettes and some are brought in legally and then sold on.

The selling on of the cigarettes is illegal. We need to see that stamped out. We need to have more fines and to educate people that it is illegal to sell cigarettes in this way. We would also like to see clearer information on the indicative limit and make it something legal rather than something very vague — in other words, on how many cigarettes can be brought in from abroad.

This needs to take place at a European level. In the past the Government tried to clarify that but because of free trade, there have been limitations on what can be done. We need to see tobacco taken out of that. It is not something that should be reviewed in the same way as other products. It should be taken out of these free trade agreements.

Ms Kathleen O’Meara

On Deputy Thomas Byrne's question on the UK Finance 2006 Act, I do not know if he was here for our discussion on the Framework Convention on Tobacco Control and our involvement as a member of the EU with the legally binding anti-contraband and counterfeit agents which we call MOUs, or memorandums of understanding. To our knowledge, none of our Finance Acts has made the specific provision the UK Finance Act 2006 has made. We would consider that the framework convention and the MOUs should be sufficient in that regard.

Mr. William Hanley

On the scanners, as acknowledged, the Exchequer is losing more than €400 million, so it is a very small investment and it makes sense.

Senator Ivana Bacik

I welcome the representatives of the different groups. I listened with great interest to their presentations. I am sorry I had to leave for some of the questions but I had to take part in a Seanad debate on mental health legislation.

I raise the Framework Convention on Tobacco Control which other colleagues raised, including Deputy O'Shea. There appears to be all-party support at this committee for the national anti-smuggling initiative for which the groups are looking. Clearly that initiative would have to be informed by and compatible with the framework convention.

I note the starting principle for the convention is that there is a fundamental and irreconcilable conflict between the tobacco industry's interest and public health policy interests. There would have to be a very clear difference between tobacco industry lobbying and the different measures in the national strategy. I do not know if the groups have envisaged any conflict that might arise or if they believe there is any potential for that.

Deputy Naughten and others raised the issue of collusion in smuggling by tobacco companies and the UK Finance Act's obligation on tobacco companies. It seems fairly self-evident that it is in the interests of tobacco companies to turn a blind eye to a certain level of smuggling given that it will increase consumption and demand.

I note the fine in the UK Act is up to £5 million for this offence but I am not aware of an equivalent fine in our legislation. The witnesses have been asked already about penalties and I am aware it is being increased tenfold in the Finance Bill 2010 to €126,970 so that the maximum penalty is much higher than heretofore but certainly nothing like the £5 million penalty. The submissions focused more on enforcement which is right because the general argument in criminal justice is that a more effective deterrent strategy is high risk of detection and strong levels of enforcement rather than just high penalties because the latter alone make no sense if the law is not being enforced and people know they can smuggle almost with impunity. Is the delegation suggesting that fines of the equivalent should be built into our legislation or is the increased penalty enough?

I am interested in the analysis of the synergies with anti-drugs policies in using the very developed mechanisms through the local drugs task forces, the customs drugs freefone and so on, which could be expanded to encompass tobacco smuggling. It is interesting to note that our language is so different. We talk about trafficking in illegal drugs and tobacco smuggling and straight away there is a subtle difference. Perhaps we should call it cigarette trafficking. As a criminal lawyer I am not aware of the use of the Criminal Assets Bureau in cases of tobacco smuggling and yet it is one of our most effective tools in the anti-drugs strategy for illegal drugs. Does the delegation have any comments on that issue?

Chairman

I welcome Senator Cannon. This is his first time to attend a meeting of the committee.

Senator Ciaran Cannon

I thank the Chairman and welcome the delegation. I have listened with interest to the debate. On the issue of the battle against the illicit tobacco trade I agree with Senator Bacik that it almost demands the same level of seriousness be applied to this trade as the other illicit drugs that are traded in our country such as cocaine and heroin. At the end of the day this illicit tobacco trade is almost another income or revenue stream for those already involved in drugs such as cocaine and heroin. The same groups and the same gangs are involved in it. Dr. Brown spoke earlier about addressing each link of the supply chain and how one might take out a particular link. One link I do not see addressed in the delegation's document are the end users. Why is some punitive measure not applied to them because they knowingly purchase an illicitly traded product? Given the significant and very visible markings on legally traded products we are coming to a point where people cannot claim they did not know they were purchasing an illegal product. At the end of the supply chain in other countries, have fines been suggested or imposed and, if so, how effective have they been in reducing the illicit trade?

Mr. William Hanley

The Senator raised the issue of end users and whether they can identify the product. We have seen plenty of samples of counterfeit product which people have tried to return to our stores. They look the same and it is very difficult to identify one packet from the other. Therefore, it would be difficult to impose a fine in that regard.

Senator Bacik asked about the UK fine of £5 million while the fine here is €126,000. Penalties at that level would certainly be a deterrent. We are coming from a base fine of just over €400 in recent years so that there is a big gap. The fine of £5 million is there but if it is not imposed it is of no real relevance.

Ms Kathleen O’Meara

Senator Bacik is correct about the maximum penalty. We welcome the response by the Department of Finance and the Minister for Finance who specifically referred to tobacco smuggling in his Budget Statement. It is a response and by Department of Finance standards, it is a considerable increase in fines. When one considers the Greenore haul or the size of the illegal hauls being uncovered, a penalty of €126,000 is very little. While we welcome the response by the Department, the maximum penalties need to be far higher than that and much more along the lines of those to which the members referred.

With regard to synergies with anti-drug policies, in my opening remarks I referred to anecdotal evidence given by members of how organised gangs engaged in drug trafficking — Senator Bacik pointed out interesting distinctions in language — have now moved into the tobacco area. We have not got to the bottom of this yet but our understanding is that tough legislation passed by this House specifically to combat drug trafficking is not available to the Garda in regard to cigarette smuggling. We are examining that to ascertain if there is some way that can be dealt with and amended to give the Garda the power it would need to treat cigarette smuggling with the same seriousness as we treat drug trafficking.

Mr. Chris Macey

With regard to Senator Cannon's point on applying penalties to the end user, I am no lawyer and I do not know what the difficulties would be, but on-the-spot fines should be imposed on people purchasing smuggled cigarettes. If one buys cigarettes at half the market price on the street corner, it is fairly clear they are smuggled.

Senator Ciaran Cannon

That is the point I want to make. While I agree with Mr. Hanley, those engaged in this activity have become very adept at mimicking the legal product. If one buys cigarettes on the street corner or from a person who knocks at one's door in an estate, one must be aware that one is not getting the correct product.

Mr. Chris Macey

Absolutely. On-the-spot fines might be a deterrent in that respect. In regard to criminal gangs——

Chairman

Before Mr. Macey moves on from Senator Cannon's point, he asked if the end user is penalised in other countries. Does Mr. Macey have any knowledge of that?

Ms Kathleen O’Meara

There are penalties in Singapore.

Dr. Angie Brown

And New Zealand.

Chairman

Those are the only two countries to the representatives' knowledge.

Dr. Angie Brown

Yes.

Chairman

Mr. Macey might continue.

Mr. Chris Macey

I wish to add another point about the criminal gangs involved. The US customs commissioner, Raymond Kelly, told Congress that:

International cigarette smuggling has grown to a multibillion dollar a year illegal enterprise linked to transnational organised crime and international terrorism. Profits from cigarette smuggling rival those of narcotic trafficking.

Dr. Angie Brown

I agree absolutely that we need higher fines and proper deterrents. On-the-spot fines are very useful for door-to-door selling and so on. Obviously the amount of the fine has to be in proportion to the amount of goods smuggled. People must be educated not to buy these products and on-the-spot fines should help in that respect.

Chairman

Does anyone wish to make any final comments?

Mr. John McCormack

On behalf of the three organisations I thank the Chairman for allowing us to attend. Some useful ideas have emerged. For example, taking away the driver's licence from the van driver was a good one. Another good idea was to make it illegal to use children in such a fashion to sell illicit cigarettes. It is important to have a proper national anti-smuggling strategy. There are issues around making the Framework Convention on Tobacco Control real, and the fact that the Government will not engage with the tobacco industry. Mr. Macey from the Irish Heart Foundation has outlined how it can be done successfully in other countries. Ireland needs to do it. The importance of legislation was highlighted by the Irish Cancer Society. The ASH contribution focused on the prevalence of health issues. Linking with Retailers against Smuggling has been important as well. Retailers would not dream of selling cigarettes to minors. The idea of getting the Garda to block mobile telephones is important.

We did not discuss the prevalence of cancer. Deputy Deenihan suggested we need to do more in order to highlight the prevalence of cigarettes. The State needs to do more in that regard. Today is national no smoking day but the funding for the national smokers quit line is completely insufficient. We would encourage smokers who are listening who want to give up to telephone the national smokers quit line on 1850 201203.

Chairman

That is the first commercial we have had in the committee.

Senator Ivana Bacik

There is probably a rule against it.

Chairman

I am sure there is. I thank the witnesses for attending. I also thank members, particularly in respect of the comments they made. It is obvious they have a great interest in this matter. The committee will reflect on the various contributions made to it in the interests of discovering how it might progress the matter further.

The joint committee adjourned at 4.10 p.m. until 2 p.m. on Wednesday, 10 March 2010.