Illicit Trade in Tobacco

Questions (38, 39, 40, 41)

Colm Keaveney

Question:

38. Deputy Colm Keaveney asked the Minister for Finance the number of seizures of illicit cigarettes or other tobacco products that have been made by the agencies of the State in each calendar year from 2011 to 2013, broken down by both the numbers of seizures and the quantities seized; and if he will make a statement on the matter. [14225/14]

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Colm Keaveney

Question:

39. Deputy Colm Keaveney asked the Minister for Finance the specific measures he has taken to combat the trade in illicit cigarettes or other illicit tobacco products since March 2011; and if he will make a statement on the matter. [14226/14]

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Colm Keaveney

Question:

40. Deputy Colm Keaveney asked the Minister for Finance his estimate of the size of the trade in illicit cigarettes or other illicit tobacco products; and if he will make a statement on the matter. [14227/14]

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Colm Keaveney

Question:

41. Deputy Colm Keaveney asked the Minister for Finance the specific measures he has taken to combat the trade in illicit cigarettes or other illicit tobacco products since March 2011; and if he will make a statement on the matter. [14228/14]

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Written answers (Question to Finance)

I propose to take Questions Nos. 38 to 41, inclusive, together.

The numbers of seizures of illicit cigarettes and other illicit tobacco products, and the quantities of product seized, in each of the years from 2011 to 2013, are set out in the table.  

 

Cigarettes

 

 

Tobacco

 

 

Seizures

Quantity (Million)

 

Seizures

Quantity (Kgs)

2011

10,581

109.1

 

1,500

11,158

2012

8,108

95.6

 

1,395

5,277

2013

5,802

40.8

 

1,086

4,203

 

I am advised by the Revenue Commissioners that the extent of the illicit cigarette market in Ireland is estimated through annual surveys of smokers. These surveys are undertaken for Revenue and the National Tobacco Control Office of the Health Services Executive by IPSOS MRBI. The survey for 2012 found that 13% of cigarettes consumed in Ireland are illicit. The comparable figure for 2011 was 14%. This would suggest that the extent of the problem is being contained, as a result of the extensive action being taken against the smuggling and sale of illicit product. A further survey was carried out at the end of 2013 and the results of this will be available in the near future.

The Deputy will of course appreciate that estimating the scale of any illegal activity and the resultant tax loss is difficult. I am however satisfied that the IPSOS MRBI survey is the best indicator of the extent of the market in illicit cigarettes. This is because of the methodologies used and the consistent manner in which the survey has been undertaken over a number of years. In addition, the survey methodology is, unlike other methodologies such as empty pack surveys, capable of distinguishing between legal personal imports and illicit cigarettes. The survey is also geographically representative and, unlike others, takes social class, age, gender and nationality into account.

I am advised also that combating the illegal tobacco trade is, and will continue to be, a high priority for the Revenue Commissioners. Their work against this illegal activity includes a range of measures designed to identify and target those who are engaged in the supply or sale of illicit products, with a view to seizing the illicit products and prosecuting those responsible. This multi-faceted strategy includes ongoing analysis of the nature and extent of the problem, developing and sharing intelligence on a national, EU and international basis, the use of analytics and detection technologies and ensuring the optimum deployment of resources at points of importation and within the country.

Interception of illicit tobacco products is achieved through a combination of risk analysis, profiling and intelligence and the screening of cargo, vehicles, baggage and postal packages. Revenue officers also target the illicit trade at the post-importation level by carrying out intelligence-based operations and random checks at retail outlets, markets and private and commercial premises.

There is extensive cooperation with An Garda Síochána in combating the illicit trade, and the relevant agencies in the State also work closely with their counterparts in Northern Ireland, through a cross-border group on tobacco enforcement, to target the organised crime groups that are responsible for a large proportion of the illegal tobacco market. In addition, cooperation takes place with other revenue administrations and with the European Anti-Fraud office, OLAF, in the on-going programmes at international level to tackle the illicit trade.

In addition, legislative action has been taken over recent years to ensure that the Revenue Commissioners have the requisite powers to respond effectively to the problem of the illegal tobacco trade. The Finance Act 2012 clarified the legal basis for Revenue officers to open and examine the contents of postal and courier packets that are reasonably believed to contain untaxed excise products. The Finance Act 2013 introduced new offence and forfeiture measures relating to the illicit production of tobacco, including offences for involvement with illicit tobacco production, knowingly dealing in or delivering any illicit tobacco product and keeping materials and equipment for the purposes of illicit production.  Provision was made also for the forfeiture of any equipment or materials, including unmanufactured tobacco, used for illicit production.

  That Act also strengthened the offence provisions relating to the sale or delivery of unstamped tobacco products.  The Finance (No. 2) Act 2013, provided that a person suspected of an offence of dealing in, or with, unstamped tobacco products must provide information to a Revenue Officer or a Garda, may be required to present any tobacco product concerned for examination, and makes provision for search by a Revenue Officer or Garda of any bag or other receptacle that he or she reasonably believes to contain tobacco products that are concerned in the offence.

As well as those changes to primary law Ireland, in accordance with EU Directive 2008/118/EU, introduced a quantitative restriction, with effect from 1 January 2014, on the number of cigarettes that may be brought into the State for personal use by individuals travelling from Bulgaria, Croatia, Hungary, Latvia, Lithuania and Romania.  The Excise Duty on Cigarettes (Quantitative Restrictions) Order 2013 (S.I. No. 553 of 2013) provides that the number of tax-paid cigarettes that may be brought into Ireland for personal use by individuals travelling from those Member States, without payment of further excise duty in Ireland, is restricted to 300.  Anyone with cigarettes in excess of that quantity must declare them to a Revenue Officer and pay the appropriate excise duty.  This restriction will remain in place until 31 December 2017 or until such time as the particular Member State has achieved the required EU minimum tax levels, whichever is the earlier.

Tax Yield

Questions (42)

Colm Keaveney

Question:

42. Deputy Colm Keaveney asked the Minister for Finance the VAT and excise return from tobacco sales in each calendar year from 2011 to 2013; and if he will make a statement on the matter. [14230/14]

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Written answers (Question to Finance)

I am informed by the Revenue Commissioners that the yield from Tobacco Products Tax and the estimated VAT on Tobacco products for the years 2011 to 2013 are as shown in the table below.  The Value Added Tax receipts are estimated, as the VAT returns do not require the yield from a particular sector or sub-sector of trade to be identified.  

-

Tobacco Products Tax

VAT (Estimated)

-

€m

€m

2011

1,126

325

2012

1,072

339

2013 (Provisional)

1,064

317

European Stability Mechanism

Questions (43, 45)

Pearse Doherty

Question:

43. Deputy Pearse Doherty asked the Minister for Finance when the operational framework and guidelines for the use of the ESM direct recapitalisation tool will be finalised; and if he will make a statement on the matter. [14242/14]

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Pearse Doherty

Question:

45. Deputy Pearse Doherty asked the Minister for Finance the way the ESM direct recapitalisation instrument will play a role in banking union and the separation of banking and sovereign debt; and if he will make a statement on the matter. [14246/14]

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Written answers (Question to Finance)

I propose to take Questions Nos. 43 and 45 together.

The Euro-area Heads of State or Government (HoSG) agreed in June 2012 that "it is imperative to break the vicious circle between banks and sovereigns", and that when a Single Supervisory Mechanism (SSM), which forms part of an overall Banking Union proposal involving the ECB, is in place and operational, the European Stability Mechanism (ESM) will have the possibility to recapitalise banks directly. The Eurogroup meeting of 20 June 2013 agreed on the main features of the European Stability Mechanism's Direct Recapitalisation Instrument or DRI. The DRI will come into effect when the SSM is in place and operational. This is not expected to take place until late in the current year.

The operational framework of the DRI has been discussed at ministerial level and the aim is to complete this discussion as soon as possible in order to allow the ESM Member States sufficient time to complete any necessary national procedures before the SSM comes into effect later this year. The overall Banking Union proposal involves an integrated system for the supervision of cross-border banks in the form of the SSM; harmonised EU rules on deposit guarantee schemes ('DGS'); a European resolution scheme commonly referred to as the Bank Recovery & Resolution Directive (BRRD) and; a Single Resolution Mechanism (SRM) to coordinate the application of resolution tools to banks under the Banking Union.

As you are aware, one of the core objectives of Banking Union is to break the link between the sovereign and the banking sector by strengthening the banking system and making it more resilient. A key feature is the need to provide authorities with a credible set of tools to intervene sufficiently early and quickly in an unsound or failing bank so as to ensure the continuity of a bank's critical financial and economic functions whilst minimising the impact of a bank's failure on the economy and financial system, by requiring that shareholders bear losses first followed by creditors while at the same time minimising the costs for taxpayers.

Banking supervision in the EU is currently the responsibility of the Member States. However, the financial crisis showed that national supervision has not always been effective in spotting problems in banks. Also it showed how quickly problems in the financial sector of one country can spread to another i.e. contagion. Therefore, the European Commission has overseen the establishment of the SSM. The SSM will act as a central authority that oversees the key aspects of the activities of banks in the euro area. This is particularly important in order to ensure an effective overview of trans-national banking groups, which often have subsidiaries in many countries. The SSM is the basis for the next steps towards the banking union. This reflects the principle that the ESM will have the possibility to recapitalise banks directly when the SSM is in place and operational.

The objective of the ESM's DRI will be to preserve the financial stability of the euro area as a whole and of its Member States in line with Article 3 of the ESM Treaty, and to help remove the risk of contagion from the financial sector to the sovereign by allowing the recapitalisation of institutions directly. I remain confident that the commitment made by the EU HoSG in June 2012 to break the vicious circle between banks and sovereigns will be respected.

European Stability Mechanism

Questions (44)

Pearse Doherty

Question:

44. Deputy Pearse Doherty asked the Minister for Finance the way the single resolution fund will play a role in banking union and the separation of banking and sovereign debt; and if he will make a statement on the matter. [14245/14]

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Written answers (Question to Finance)

The Single Resolution Mechanism (SRM) is a centralised resolution mechanism for Member States who belong to the Single Supervisory Mechanism (SSM). Its purpose is to ensure that resolution can take place at the same level as supervision, rather than being conducted at national level.  It is considered as an important contributing factor to breaking the link between the sovereign and the banking sector.

The SRM will allow decisions to be made in a more objective and independent fashion than if they were been made by national supervisors. The proposal which has been agreed sees the SRM taking its decisions in line with the principles of resolution set out in the Bank Recovery and Resolution Directive in particular that shareholders and creditors should bear the costs of resolution before any external funding is granted, and private sector solutions should be found instead of using taxpayers' money.  It is felt that in most scenarios, contributions by shareholders and creditors should be sufficient to finance resolution. If exceptionally, additional resources were needed a Single Resolution Fund with a target level of 1% of covered deposits within the Banking Union (approx. €55bn) will come into place as a last resort to finance the bank resolution process.

In the General Council approach reached on SRM at the extraordinary ECOFIN on 18 Dec, it was agreed that as part of the overall compromise that aspects of the SRM relating to financing be carved out of the Regulation, in particular the transfer of contributions from national resolution funds to national compartments in the SRM, and gradual mutualisation of national compartments in the SRM over a 10 year period. This approach was adopted because certain member states  were not satisfied that Article 114 provided an appropriate legal basis for the operation of the Single Resolution Fund. It was agreed that an Intergovernmental Agreement would cover these matters.

Under the recently reached agreement between the Greek Presidency and the European Parliament, the transition period to a fully mutualized SRF has been reduced to 8 years. In addition the pace of mutualisation has been significantly increased in such a way that within two years 60% mutualisation will occur with the balance being achieved in a linear fashion up until the end of year 8. What this means in practical terms is that if a bank is failing or likely to fail the first step is that the bail-in rules will be applied to losses. If there are still losses to be absorbed, the next point of contribution will be the funds within the Member State's national compartment in the SRF, followed by the mutualised part of the national compartments of other Member States. After 8 years the SRF will be fully mutualised.