LONDON - Hiking tobacco taxes boosts the illegal tobacco trade. That??s what will happen when the U.K. government implements a planned tobacco tax, Imperial Tobacco Group PLC said. The Wall Street Journal reports that the tobacco firm called the proposal a "big mistake" that would lead to more counterfeiting and smuggling of tobacco products.

The U.K. Chancellor of the Exchequer George Osborne said the tobacco tax ?" which would encompass hand-rolling tobacco, chewing tobacco, pipe tobacco, cigars and cigarettes ?" would jump 5% over inflation. That would translate into a bump of 37 pence on a cigarette pack.

"[This] heavy-handed tobacco taxation policy will simply tempt more smokers to buy illicit tobacco products," said Amal Pramanik, Imperial's U.K. general manager. "The U.K. is already a key target market for criminal gangs of tobacco smugglers and counterfeiters. Today, the government has given further encouragement to these criminals at the expense of shopkeepers, many of whom are struggling to make ends meet."

Osborne justified the increase on health reasons. "Smoking remains the biggest cause of preventable illness in this country. There is strong evidence that increasing the price of cigarettes deters people from smoking," he said to parliament.

A recent study found that one in seven cigarette packs consumed in the United Kingdom are contraband.