Tobacco sector wants freeze on cigarette duty
The tobacco industry has demanded George Osborne freeze cigarette duty in this month’s Autumn Statement after landmark research suggested “sin taxes” don’t encourage people to give up.
Academics found the number of smokers in Eastern Europe did not fall when 10 states joined the EU in 2004 even though the price of cigarettes soared by as much as 100pc ahead of wages when they became subject to Brussels rules on minimum tax levels.
On average, the affordability of cigarettes, measured by minutes of work needed to buy a pack of 20, fell by 40pc. But there was no fall in smoking prevalence and in several countries, the number of smokers actually rose, to the bafflement of researchers.
Cigarette manufacturers say the research shows successive tobacco duty hikes are unjustified.
“There was no correlation between changes in cigarette affordability and changes in prevalence, either before or after adjustment for unemployment rates or changes in Tobacco Control Scale Scores [the measure of how easily cigarettes are sold]”, the researchers wrote in Addiction , the medical journal.
“We expected to see a marked reduction in smoking prevalence,” the team, funded by Cancer Research UK, the British Heart Foundation and the Department of Health (Euronext: IXSHL.NX – news) , added.
The exchequer takes 16.5pc of the retail price of cigarettes, on top of a levy of £155 per thousand cigarettes. In the last Budget Mr Osborne increased cigarette duty by 2pc above inflation, putting 50p on a pack of “economy” cigarettes. “This will reduce smoking and improve our nation’s health,” he said.
Adam Spielman, a tobacco analyst at Citigroup (NYSE: C – news) , said the results contradict the “absolute orthodoxy” of public health policy that tax increases cut smoking.
“It is widely assumed for every 10pc increase in the price of cigarettes, the volume of smoking will go down 4pc and therefore if the government wants to reduce smoking, one way is to increase tax,” he said. “It’s a surprising result.”
A spokesman for the Tobacco Manufacturers’ Association said: “This study clearly demonstrates that taxation is a largely ineffective tool for reducing consumption. We very much hope that, in his Autumn Statement, the Chancellor will take the opportunity to combat tobacco smuggling in a meaningful way and resist the temptation to raise duty.”
It is estimated a quarter of cigarettes smoked in Britain are now smuggled, costing the exchequer £3bn a year.
A Treasury spokesman said: “Smoking is the single largest cause of preventable illness and premature death in the UK.”
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