I keep writing here that I think investing in firms such as tobacco companies and banks is a bad idea. Why?
Among other things (incomprehensibility in the case of banks, and the ethics thing with tobacco) there is too much regulatory and legislative risk. This week brought us yet more evidence of that.
Yesterday, the papers were full of the news of new (and huge) profit-destroying fines imposed on the banks. And today we find that HMRC is finally going to have a go at the big tobacco companies over the £2bn a year lost in tax thanks to tobacco smuggling. The theory is that they oversupply the likes of Belgium on purpose, happy in the knowledge that all the excess will make its way back to Britain with ‘holidaymakers’.
British American Tobacco is about to be fined £650,000 for this under the 1979 Tobacco Products Duties Act. This sounds like a tiny amount of money relative to BAT profits.
You may agree that it has done nothing but “provide a perfectly legal supply to a legitimate demand”, but this move makes the direction of travel of the current government clear: they need money and they’re going to find ways to get it from companies (and people) who have it and who owe it.
That’s something to bear in mind if you have any money sitting in the UK’s £34bn odd ‘tax gap’.