I thank the committee for the invitation to speak today. I am very grateful. I am a manager in business consulting and I have been invited on the back of a report we have done on illicit trade. We did the report in partnership with Retail Ireland and we presented it on 23 April. I have provided slides today but they are a bit too detailed for us to go through each one in detail.
I will give the committee a brief overview of the report, its objectives, key findings and open it up to the committee for discussion.
The purpose of the report is to raise awareness of the current issues surrounding illicit trade, to attempt to quantify the loss to the Exchequer and to put forward some reasonable and realistic joined up strategies to tackle the problem. Given that our primary focus was to raise awareness, I commend the committee on making this a public debate. A debate is needed to have these issues brought to the public's attention.
I am aware the Construction Industry Federation appeared before the committee earlier today. I was not privy to its conversation but it would have talked about cash and
the cash economy. For our report we narrowed the focus to intellectual property crime, illegal manufacturing and contraband and examined the economic impact on those sectors. Ultimately, we found the cost to the Irish economy was €1.5 billion, which is a very large amount especially when every cent of tax revenue is vital to the recovery of the public finances. Beyond the losses to the Exchequer there are wider losses to the economy, to the consumer in terms of health, clean-up costs, etc., and to legitimate business such as the NFRN in terms of loss of sales and footfall which is very important. There are also the non-financial losses.
We focused on four specific areas, some of which will be of more interest to others, fuel laundering, tobacco, digital piracy and pharmaceuticals. The reason for selecting those is that they are viewed as the biggest financial losses to the economy. However, there are losses in other areas also. We touched on some of them in the report but these four are the areas into which we went into more detail and attempted to quantify.
What are the costs to the Irish economy? It may be beneficial if I was to put some of the key findings up on the screen. The loss of €1.5 billion is actually €1.48 billion. It is important to recognise that there is an inherent difficulty in quantifying anything that is illicit. Something that is illicit is, by its nature, illegal and illegal traders do not prepare proper books and records and do not give returns. To combat this we have done a range of low to high assessments in order to best assess the actual losses. There are losses to the Exchequer, retailers, consumers and right holders. I shall concentrate on the higher end losses. We think the loss at the higher end is about €550 million and for the Government the loss to the Exchequer is about €930 billion or €940 billion. These are significant losses. The biggest loss arises from tobacco followed closely by fuel laundering. As I expect some questions on these later, I will not go into the numbers in too much detail at this stage.
One of the key recurring themes throughout our study was organised crime and the involvement of organised crime in illicit trade. It is an illegal activity but the scale and scope of some of the organised criminal activity that is taking place is significant. The Garda, the PSNI and Interpol have considerable evidence of a growing linkage between these trades. Therefore, one will not find a person involved only in fuel laundering, but also involved in fuel laundering, tobacco, pharmaceutical, alcohol, food and a broad spectrum of illicit trades. That was one of the key findings from our study.
Another key finding is the involvement of terrorist groups. They use this to fund terrorist activities. However, the Garda want to say it is not just financing terrorists, they are in it for profit also and there is an element of pure greed. Once they have established a supply route, it does not matter what they bring in as there are only two scanners at the ports and airports.
For each specific area we had specific recommendations. On an over-arching level we suggested an eight point strategy in terms of what can be used. This strategy can be used individually in the sectors but, more important, we want it centralised and used across all the sectors. It is important to understand the size and nature of the problem. There needs to be an evaluation of the facilitators of illicit trade and there needs to be effective legislation and deterrents. There needs to be a balanced and effective tax collection system and we need to strengthen enforcement and to educate the public. As this is not an issue solely for Ireland but is an international issue, we need international co-operation and an open and frank debate with the legitimate industry. Our strategy is about a balanced approach across all industries because there are key links.
By implementing a more consistent and evidence-based approach to the problem, we believe it is possible to tackle the drivers of illicit trade and reduce illicit trade across Ireland. We recommend the establishment of a task force, a committee or some group of people from a broad spectrum of public bodies, key stakeholders of industry and experts to debate and, ultimately, take responsibility for implementing the strategy and ensuring co-ordination and communication between the State agencies and the industry. I commend the work done by State agencies but more needs to be done as clearly the problem is not going away but is actually getting worse.
I will be happy to take questions. I thank the committee for its time and commend it on what it is doing.
