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How much tax would a 60c cigarette price hike bring in? (Hint: Not as much as you think)

Michael Noonan’s been advised that the shock-and-awe tactic might have some other effects on smokers’ behaviour.

Image: smoking via Shutterstock

THE ‘OLD RELIABLES’ of cigarettes and alcohol have been an easy target for Governments as a means of revenue-raising, particularly in recent post-crash Budgets. 

But how much would be brought in by hitting smokers with a harsh 60 cent rise in excise duty?

Potentially, almost a million euro, according to the Revenue Commissioners.

However, the situation’s not quite that straightforward. The shock-and-awe tactic could have some other effects on smoker behaviour.

Questions

Sinn Féin’s Sandra McLellan asked the Department of Finance to provide figures last week on how much could be brought in for the Exchequer by raising the duty on a pack of 20 cigarettes by 10, 20, 50 and 60 per cent.

At the maximum, here’s what that potential yield would be…

10c — €16m
20c — €31m
50c — €77m
60c — €92m

However, replying to the Cork TD’s written question, Finance Minister Michael Noonan said research by the Revenue Commissioners had shown that price hikes, particularly those at the higher end of the spectrum, were unlikely to to lead to a higher tax take.

“The likely reduction in consumption of Irish duty paid cigarettes from higher duty on tobacco will arise from a combination of factors,” Noonan said in his reply.

Some people will reduce their smoking levels; others will simply substitute their consumption to non-Irish duty paid cigarettes.

“These can be either illicit or legally brought into the country. I am advised by the Revenue Commissioners that the extent of the illicit cigarette market in Ireland is estimated through annual surveys.”

The Minister’s response goes on to state that early indications from last year’s survey found 11 per cent of all cigarettes smoked in Ireland last year were illicit.

A further five per cent were bought elsewhere, and legally brought into the country.

That’s a slight decrease on the 2012 figures, when 13 per cent of cigarettes were illicit and a further six per cent were bought elsewhere.

Read: So, where does the tax on alcohol, tobacco and petrol go?

Read: Budget 2014: the key things to know from today’s announcement

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