I am aware of the report on “Illicit Trade in Ireland”, prepared for Retail Ireland by Grant Thornton, that was published last week, focusing in particular on the fuel, tobacco, digital piracy and pharmaceuticals sectors.
I understand that the report looks at the costs associated with illicit trade in these sectors. Estimating the extent of any illicit activity is, of course inherently problematic and must be approached with caution. It follows that unless a credible methodology is specified for estimates of illicit trade and the associated tax loss, they must be regarded as speculative. Reflecting these difficulties, the report acknowledges that there are a wide variety of estimates, ranging between €418 million and €937 million, for the loss of revenue to the Exchequer from illicit activity in the sectors concerned.
All interested parties are agreed, nevertheless, that illicit trade in the sectors addressed by the report, and shadow economy activities in general, pose a threat to legitimate and compliant businesses, as well as depriving the Government of tax revenues. Tackling the illegal activities in those sectors, and broader black economy activities, is therefore a key priority.
I am informed that the report estimates the tax losses in the tobacco sector due to illicit trade in 2012 at €569m. This appears to be a tobacco industry figure, with which the Revenue Commissioners and other commentators would not agree. A survey is carried out annually on behalf of the Revenue Commissioners and the National Tobacco Control office of the Health Services Executive on the extent of consumption of illicit cigarettes in the State. This survey is carried out annually across a representative group of the public in a consistent, comprehensive, reliable and robust manner and the survey results distinguish the non-Irish duty paid product between product legally purchased abroad and product that is illegal. The survey for 2012 indicates that 13 per cent of cigarettes consumed were illegal; this corresponds to an Exchequer loss, in excise duty and VAT, of €240m. I am assured that the annual survey of the Revenue Commissioners is a good indicator of the extent of the penetration of the Irish market by the illegal trade.
Extensive enforcement action by the Revenue Commissioners against the smuggling and sale of illicit cigarettes and other tobacco products resulted, during 2012, in the seizure of 95.6 million cigarettes and 5,276 kilograms of tobacco. There were 22 convictions on indictment and 110 summary convictions during the year for offences related to the smuggling or sale of illicit cigarettes and tobacco.
I am advised that the report says, in relation to illicit activity in the fuel sector, that little progress has been made to tackle this important issue. This is not true. Recognising the threat that this illegal activity poses to the exchequer and to legitimate business, the Revenue Commissioners adopted a comprehensive strategy to tackle the problem. This strategy encompasses the following elements:
- A strengthening of the licensing regime for auto fuel traders with effect from September 2011.
- A new licensing regime for marked fuel traders with effect from October 2012.
- The introduction by Regulation of new requirements in relation to fuel traders’ records of stock movements and fuel deliveries to ensure data are available to assist in supply chain analysis.
- The introduction of new supply chain controls from January 2013 that require all licensed fuel traders to make monthly electronic returns to Revenue of their fuel transactions. The first returns were received by Revenue in February. I understand that the Revenue Commissioners have instituted a process of rigorous analysis of these returns. This will support the development of a comprehensive overview of supply patterns and the identification of suspicious or anomalous transactions, and facilitate robust follow-up enforcement action where necessary.
- An intensified targeting, in co-operation with other law enforcement agencies on both sides of the border, of fuel laundering.
- An intensified targeting, in co-operation with other law enforcement agencies on both sides of the border, of the illicit sale of laundered products. This involved a concentration on building intelligence, gaining an understanding of the supply chain, applying analytics to available data, embarking on a strategy of closing down stations that were in breach of legislation and/or regulations and working collaboratively .with other law enforcement agencies on both sides of the border. One of the objectives is to cause maximum disruption to laundering plants and networks and to prevent the trading by stations that are operating outside the law.
- The Revenue Commissioners held discussions with HM Revenue & Customs in the UK on regulatory measures to tackle the laundering of fuel and the two administrations signed a Memorandum of Understanding in May 2012 on a joint approach to finding a more effective marker for use in both jurisdictions. An Invitation to Make Submissions was published in June 2012. The twelve submissions received by the deadline in November 2012, are currently being evaluated.
Revenue’s enforcement strategy in the fuel sector has yielded significant results. In the period 2011 to 2012, over 2 million litres of fuel was seized, 20 fuel laundries were detected and product and ancillary equipment seized, and 89 filling stations which were found to be unlicensed, or in breach of licensing conditions, were closed.
In the case of counterfeit goods, the role of the Revenue Commissioners is to prevent the entry of such goods into the State from outside the EU, and this has resulted in significant seizures of counterfeit goods in recent years. In 2012, there were 5,580 seizures involving 142,100 items, with an estimated value of €5.45m. The range of items seized includes clothing, personal effects, electronic goods, cosmetics and medicines.
Enforcement action in relation to the national sale and distribution of such goods is a matter for An Garda Síochána. I understand that there is close cooperation between the Revenue Commissioners and An Garda Síochána in tackling the counterfeit trade, and that there is also ongoing international cooperation on the matter.
I am advised also that the Revenue Commissioners are conscious that the persons responsible for illegal activities in the sectors with which the report is primarily concerned are constantly looking for new ways to circumvent legal requirements and avoid detection and that Revenue’s approach must, therefore, be flexible and adaptable. Accordingly, the Revenue Commissioners continuously review their enforcement methodologies. Revenue also advise me that the support of legitimate business in contributing to Revenue’s information and intelligence is important.
As I stated, I understand that the Revenue Commissioners continuously review their methodologies and their legislative requirements and where necessary I will of course, give careful consideration to any proposals that might be put to me in that regard.