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Sunday, November 8, 1998 Published at 18:00 GMT

Business: The Company File

Cigarette giants in smuggling scandal

Cigarette smuggling from Andorra to Britain is rife

Leading British tobacco firms have sold millions of cigarettes to customers overseas knowing that they would be smuggled illegally back into the UK, according to documents unearthed by the BBC's Money Programme.

A smuggling racket across Europe
Gallaher, which produces best selling brands such as Silk Cut and Benson & Hedges, stands accused of shipping cigarettes into the tiny principality of Andorra, sandwiched between France and Spain in the Pyrenees, even though they were aware that the cigarettes were destined to be smuggled back into the UK.

[ image: Cigarette brands have flooded into Andorra]
Cigarette brands have flooded into Andorra
The number of British-made cigarettes imported into Andorra increased over a hundred-fold from 1993 to 1997.

According to UK customs officials Andorra was the largest source of smuggling in Europe, importing 9m cigarettes a day but officially exporting none.

In other words either every man woman and child was smoking 140 cigarettes a day or they were being smuggled out.

Spanish police believe that of the smuggled cigarettes about half were British brands.

The programme has obtained a confidential report from a European Union task group revealing the close relationship between British tobacco manufacturers and their importers in Andorra.

EU evidence

Per Brix Knudsen, chief EU fraud investigator, told the Money Programme that the cigarette manufacturers must have been aware that the sudden increase of the brands of cigarettes to Andorra could not be explained by any legal supply to a normal commercial market.

[ image: The confidential EU report into smuggling]
The confidential EU report into smuggling
Asked if he was suggesting that manufacturers were knowingly selling to smugglers Mr Knudsen said: "We find it difficult to seen how they could avoid knowing that."

Challenged by the Money Programme, the chief executive of Gallaher, Peter Wilson, said: "We will sell legally to our distributors... if those distributors subsequently sell those products on to other people who are going to illegally bring them back into this country, that is something totally outside our control."

Smuggling explosion

Cigarette smuggling into the UK has exploded over the past few years, costing the government £600m in lost tax revenues.

Customs officials believe that around one in 10 of all cigarettes sold now in Britain are contraband, and that figure is increasing all the time.

The price gap between cigarettes in Britain and neighbouring countries is getting wider.

After the latest 21p hike in duty, due to come into force next month, 20 Benson & Hedges cigarettes will cost about £3.50 in Britain compared to just £1.79 in France and £1 in Andorra.

Around 70% of the rolling tobacco smoked in Britain is thought to be smuggled into the country without paying duty.

The UK Tobacco Manufacturers Association blamed the government for the increasing amount of tobacco smuggling.

John Carlisle, spokesman for the association, said: "By increasing taxes and encouraging smuggling we are getting the worst of all worlds."

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