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Conflicting thoughts on Budget hike in tobacco prices

The Irish Heart Foundation is calling for a €1 tax increase on a packet of 20 cigarettes in the next Budget. But Retailers Against Smuggling believe there should be no increase in excise on tobacco.

Image: Matt Morton/PA Wire/Press Association Images

THE IRISH HEART Foundation is calling on the Government to introduce a €1 tax increase on a 20-pack of cigarettes in the next Budget.

It says that this would bring in €68 million extra receipts and a further €28 million in indirect public finance benefits.

A tax freeze on tobacco was imposed by the previous Government in the last two budgets, which the foundation says cost the state €200 million.

It also says the increase would result in 30,000 people quitting smoking in Ireland, and that as roughly one in two smokers die from the habit, this would lead to 15,000 people countrywide potentially living longer.

The claims are made in a new report, Tobacco Taxation, Smuggling and Smoking in Ireland, which was compiled by UK consultancy Landman Economics.

A report by the Research and Analytics Branch of the Revenue Commissioners claims that further tax increases would lead to a drop in tax revenue and would encourage more people to use untaxed products.

However, Landman Economics director Howard Reed said that this analysis was “out of kilter with all similar international studies”, and “the evidence provided by Irish data also showed that it was seriously flawed”.

He said that when tobacco tax rose by 11% in 2009, revenue increased by 9%.

The report concludes that further increases in tobacco taxation would also produce substantial benefits to the public finances – ranging from just under €50m per year for a 50 cent rise, €96 for a €1 hike and €165m if tax was increased by €2.

It says extra tax take would account for 70 per cent of the total, with the rest coming from indirect benefits such as reduced health service spending and reduced net spending on benefits.

Figures highlighted in the report show that after successfully lobbying for a tax freeze in 2009, the tobacco industry then put up its prices on a packet of 20 cigarettes by 13.5 cent.

In addition to a price increase in the Budget, the report recommends:

  • A Government commitment to a price escalator whereby tobacco taxes rise by a certain amount each year in future budgets
  • Expenditure on anti-smuggling operations such as enforcement and supply chain control should be increased by around €8 million per year.

Chief executive, Michael O’Shea commented:

A total of 5,700 people die every year in Ireland from tobacco related disease and illness. That’s the equivalent of two 9/11s a year on Irish soil or a jumbo jet crash every month. By seriously addressing this catastrophe the Government can make the biggest contribution to reducing avoidable death in this country for more than a generation.

Meanwhile, Retailers Against Smuggling say that the retail sector has lost at least 660 jobs in the past year, according to a survey of its 3,000 members.

The retail organisation’s annual survey, carried out by Behaviour & Attitudes, found that 74 per cent of respondents said the black market cigarette sales are harming the retail sector.

In addition, 69 per cent claim that illegal cigarettes are readily available in their area.

In contrast to the Irish Heart Foundation, Retailers Against Smuggling’s pre-Budget submission asks for no increase in excise on tobacco in the forthcoming Budget.

It also calls for:

  • The introduction of a minimum fine for cigarette smuggling and illegal cigarette selling under the Finance Act
  • Increasing fines and widening the scope of the Casual Trading Act to target markets and fairs where illicit tobacco is widely available
  • Providing Customs with more resources, including a new scanner to search for illicit tobacco consignments
  • A public awareness campaign to highlight the links between the illicit tobacco trade and other forms of organised crime.

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