Friday, 24 July 2020

A no deal Brexit is no good for smokers

An interesting piece at 1828 by Dan Pryor about an issue I had missed.

The UK is facing a tobacco tariff timebomb. Britain’s black market in cigarettes is set to boom if trade talks with the European Union fail to bear fruit by the end of the year.

The damage can be easily avoided easily if the department of international trade makes some minor changes to its post-transition period tariff regime. But so far, there is no sign that politicians are aware of the problem.

The issue stems from the UK Global Tariff – our post-Brexit replacement for the EU’s Common External Tariff. In the absence of a trade agreement, the UKGT will apply to all imported goods from 1 January 2021. At present, cigarettes imported from the EU for sale in the UK (which make up the overwhelming majority of our market) are liable for tobacco duty and VAT but are not subject to any tariff.

Presumably, though, in an unfortunate oversight (since there’s virtually no domestic tobacco industry to “protect”) the UKGT in its current form will slap an eye-watering 50 per cent tariff on cigarettes and a 70 per cent tariff on roll-your-own tobacco. That’s on top of existing charges. Even with an EU-UK trade deal, if we get our rules of origin requirements wrong, the tariff could still end up applying.

The government could adjust tobacco duty downwards so that prices remain unchanged (it would get the same amount of revenue), but the anti-smokers would doubtless scream blue murder.

Or it could get a trade deal with the EU, which it should do anyway.

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