Ireland's black market in counterfeit goods endangers jobs and supports violent crime, writes Jerome Reilly
UP IN SMOKE: A revenue officer from the Customs Service with some of the 7.6m contraband cigarettes seized last month
STARTLING research has lifted the lid on Ireland's black market, which has mushroomed since the downturn -- and is now costing the economy €860m a year and killing thousands of jobs.
From illicit cigarettes to dangerous counterfeit medicines, more and more ordinary people are actively seeking out black market goods to buy on the cheap because their finances have been squeezed.
And Retail Ireland says this is playing into the hands of paramilitaries and criminal gangs who make millions from a wide range of black market enterprises including digital piracy, fake clothing, watches and perfume as well as fuel laundering.
Counterfeit booze is another major problem for the retail sector which has already suffered 30 per cent job losses since the downturn began.
Retail Ireland and a group of retailers last week briefed members of the Fine Gael Parliamentary Party on the crisis.
At the end of July, the European Commission published a report on customs seizures in the EU which showed that the number of counterfeit items intercepted in Ireland more than doubled in 2011 -- increasing 119 per cent from 2010, while the number of cases taken by customs in Ireland increased 226 per cent.
The Government has been warned that the current level of convictions is not deterring even casual criminals from street-dealing in counterfeit cigarettes, clothing or jewellery, while for the criminal godfathers there's the potential of millions in illegal profits without the risks associated with the drug trade.
Retailers claim that the vast majority of illegal activity goes undetected and that the courts rarely apply the maximum fines or custodial sentences on the statute book.
And the Government has been told that, given the massive losses to the Exchequer and the job losses in retail, it makes economic sense to spend money on stopping illegal trade.
Frank Gleeson of Retail Ireland says: "The black market is bad for everyone except criminals. It endangers jobs, by diverting consumer spending away from the employment-generating legitimate retail industry. It robs the Exchequer of much-needed tax revenues at a time when public spending is already under pressure, and it threatens communities by enriching dangerous and often violent groups who care little for the law of the land."
Another threat to legitimate traders is the increased losses from shoplifting and theft, now running at €480m a year -- up from €350m in 2005 at the height of the boom. In the third quarter of last year, 5,083 incidents of theft were reported to gardai.
But there is disparity between official estimates of losses and traders' estimates. In the case of tobacco, traders say the cost to the Exchequer of illegal tobacco is €526m a year -- but the Revenue Commissioners suggest that the figure is about €250m.
What also worries the legitimate trade is that, compared with the potential profits, court fines are being seen as a minor occupational hazard by smugglers and street dealers.
A car load of 50,000 cigarettes means a profit of €8,700. However, a van with 500,000 cigarettes can mean a payday of €87,000 for the smuggling gangs, and a container, capable of holding 7,500,000 cigarettes means a €1.3m bonanza.
The Programme for Government promised increased fines and a 10-year jail sentence on conviction, but neither has been implemented.
It is believed that criminals are making €3m per week from illegal cigarettes. Legal cigarettes now cost nearly €10 a pack but illegal cigarettes, some with higher levels of arsenic, are sold on the streets of Ireland for €4 a pack.
Some are copies of well-known brands and are passed off as such. Others are known as "cheap whites" -- produced in China, Russia and the Far East specifically for export to countries where there is a black market in tobacco. Ireland has the second highest retail price for cigarettes in the EU -- making it a prime target for the smugglers.
Action has been taken against fuel launderers. Since 2010, 19 oil laundries have been closed, with 690,000 litres of oil, 10 oil tankers and 28 other vehicles seized.
Another 366 litres of illicit mineral oil was seized from retail outlets and 52 filling stations shut down by Revenue because they were in breach of licensing conditions.
Nevertheless, the loss to the country could be as high as €155m in unpaid excise duty. Illegal fuel is also ruining car engines, and border counties have been left to clean up hazardous toxic sludge -- a by-product of the fuel "rinsing" process, which is increasingly controlled by former paramilitaries and dissidents.
Another growth area is counterfeit alcohol. While just 253 litres were seized in 2010, the amount soared to 1,309 litres last year, according to official Garda statistics. The drinks industry suggests the true figure is far higher.
There has been a concerted effort by the authorities to combat tobacco smuggling, with 109 million illegal cigarettes with a retail value of €5.9m seized last year.
Given the scale of the seizures and the seemingly inexhaustible supply on the streets, it is clear that many millions of cigarettes are getting past border controls.
Counterfeit clothing is another major problem. In April 2012 it was reported that a gang producing fake Tommy Hilfiger, Adidas and Nike apparel was found to have a series of warehouses. The value of knock-off clothing recovered was €600,000.
As well as more resources, retailers are now convinced that legislation is required to stop Ireland becoming an easy destination for black marketeers. A report by EPS Consulting for Retail Ireland proposes that in lieu of fines, State benefits and concessions should be cut from people or businesses found guilty, to the value of the loss to the Exchequer. But it suggests that jail sentences be imposed in only the most serious cases.
Instead, the Criminal Assets Bureau should focus on targeting assets, and more garda resources should be deployed. The report also says whistleblowers should be financially rewarded, and protected by legislation.