HMRC seeks to appoint ‘ID issuer’ to comply with EU legislation and tackle £2bn annual tax gap caused by illicit tobacco trade
The government is seeking a technology supplier to create and maintain a system for tracking every packet of cigarettes imported into and sold in the UK.
To comply with article 15 of the EU Tobacco Products Directive, member states have until 20 May 2019 to ensure that all tobacco products – including cigarettes, rolling tobacco, and cigars – feature a unique and traceable identification mark.
This should be embedded with the product’s specifications, and information on when, where, and by whom it was manufactured. It should also include intended retail markets and shipment routes, as well as full details of the actual supply chain – including information on every company that handled the product between its manufacture and ultimate retail sale. This must include invoices, order numbers, and payment receipts.
HM Revenue and Customs is looking to appoint a tech firm to serve as the UK’s national “ID issuer” and has kicked off an early-engagement exercise with potential suppliers.
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The department said: “The ID-issuer’s main responsibilities are: to issue unique identifiers to tobacco manufacturers and importers for every packet of cigarettes and hand-rolling tobacco, for which the ID issuer may charge a fee; and to issue unique identifiers to all economic operators in the supply chain, for which no fee may be charged.”
The supplier will be expected to provide HMRC with software including database and inventory-management packages, as well as IT services, and printed materials.
A single supplier will ultimately be handed a contract – for which no estimated length or value has yet been provided.
Potential bidders are invited to attend an engagement event in Manchester on 25 May, where they will be given the chance to hear presentations from HMRC and have individual meetings with a panel of representatives from the department.
The EU legislation also requires importers and manufacturers to put in place “data-storage contracts with an independent third party, for the purpose of hosting the data storage facility for all relevant data”. This data must be physically located in the EU.
Such measures are intended to crack down on the multibillion-pound trade in illicit tobacco. HMRC figures published last year reveal that, in the 2015/16 year, the exchequer lost £1.9bn to unpaid tobacco duties – equating to 16.7% of the total tax that should have been paid on tobacco products that year.
About £600m in duties on hand-rolling tobacco went unpaid in 2015/16 – about a third of the total revenues HMRC should have received. The tax agency also missed out on £1.3bn in duties on cigarettes, which equates to 13% of the taxes that ought to have been paid.
The tobacco sector has one of the worst “tax gaps” of all, with the UK as a whole having a gap of 6%. This translated to lost revenues of £34bn in 2015/16.