A local cigarette manufacturer given a multimillion-dollar discount on customs duty by the Government claims the usual tax on imported loose-leaf tobacco is “unjust”.

Michael Heslop, owner of The Smoke Shop, was given a discount of almost $12 million on the customs duty payable on 30,000 kilos of tobacco he brought to Bermuda in 2021, as revealed by The Royal Gazette last week.

He said the normal rate of $500 a kilogram – which was approved by MPs in 2019 – put him, the only cigarette manufacturer on the island, at a distinct disadvantage compared to importers of foreign cigarettes.

“The present tax rate is, you could say it’s unjust, because the tax now on tobacco is higher than cigarettes,” he said.

“That’s excluding manufacturing and paying rent and buying filters and paper and glue and labour and all the rest of it.”

Mr Heslop, who employs eight Bermudians, added: “Whether people support smoking or not, cigarettes are legal in Bermuda and it’s a pity not to have a factory here in Bermuda since they are able to do it in a lot of other countries.”

Mr Heslop said he would like to see “a little more favourable tax where we could have importation and foreign cigarettes”.

Former finance minister Curtis Dickinson allowed The Smoke Shop to benefit from a parliament-approved concessionary rate of $105 per kilogram in April 2021 after Mr Heslop told him the business would otherwise fold and his workforce be let go.

Records obtained by The Royal Gazette under public access to information from the finance ministry revealed the decision resulted in what the Assistant Collector of Customs called “unrealised duty revenue” of $11.9 million.

The tax was slashed after The Smoke Shop had already shipped about 15,000 kilograms of loose-leaf tobacco to the island, which was sitting on the docks.

Mr Heslop said he then “took advantage” of the duty relief and brought in another container with the same amount.

The Gazette calculates that The Smoke Shop could make 25.5 million cigarettes with 30,000 kilos of tobacco, based on a 15 per cent wastage figure shared by Mr Heslop.

That suggests the company paid about 12.3 cents per cigarette in duty under the $105 per kilogram concession. At the normal duty rate of $500 per kg, the duty would have been nearly 59 cents a cigarette.

Importers of finished cigarettes — who pay 40 cents per cigarette in duty — are understood to have complained to David Burt, the Premier, who is now the finance minister, about the discount given to The Smoke Shop.

Packs of locally made cigarettes from The Smoke Shop sell for several dollars less than the cigarettes imported by other firms, including Pitt & Company, a sister firm to BGA wholesale distributor, which is owned by businessman Wendell Brown.

The finance ministry disclosed records about the concession on April 12, after the Information Commissioner ordered it to respond to a Pati request it received last July.

Many of the documents held by the ministry were redacted before release and some were withheld altogether on seven different grounds, including that they contained commercially sensitive and confidential information, Cabinet documents and the deliberations of public authorities.

One withheld record was on behalf of Mr Dickinson to Mr Brown and was regarding “C 33 Ltd and The Smoke Shop.”

Mr Brown is a director of C 33, a local property development company.

One redacted record was an e-mail showing that Pitt & Co requested a meeting with the Government last July about the tobacco taxation issue.

The Pati disclosure shows that the Assistant Collector of Customs and a civil servant at the Economic Development Department began working “on a potential solution to taxation of local tobacco manufacturing” in February 2022.

According to a November 2022 e-mail from the former: “ … Customs would prefer to have an excise duty on production rather than a continuation of the concessionary rate. [The EDD employee] and I had been examining this possibility.”

Asked if he expected a decision on a new duty rate soon, Mr Heslop said “Not yet. They want our accounts audited first.”

BGA declined to comment last week.