Budget tobacco tax: great for health, good for the economy & no cave-in to smugglers



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Tuesday 09 March 1999

ASH/ Press releases/

 

102 CliftonStreet, London EC2A 4HW Tel: (020) 7739 5902 Fax: (020) 7613 0531

Press release
9th March 1999 Immediate
ASH
Action on Smoking
and Health

Budget tobacco tax: great for health, good for the economy and no cave-in to smugglers

Commenting on the immediate 5% real cigarette tax increase announced in today’s Budget,Clive Bates, Director of ASH, said: “We’re very satisfied.  When cigaretteprices rise, tobacco consumption falls as smokers cut down, give up or never start inresponse to the price.  With No Smoking Day immediately after the budget, it’s a goodtime for smokers to quit and feel the benefits in the pocket as well as the lungs.”

ASH estimates that the 5% tax increase in real terms will mean an immediate 17.5 penceincrease in headline cigarettes prices and result in a drop in tobacco consumption byabout 1.6% which will reduce premature deaths by about 1,300 per year in the long term.  Smoking 20 cigarettes per day will cost around £1,400 per year.

ASH applauded the Chancellor’s approach to dealing with the problem of tobaccosmuggling . Clive Bates said: “Smuggling is a law and order issue the right way totackle crime is to put more into law enforcement, not give in to it and reverse aperfectly sensible tax and health policy.  Thankfully the Government ignored thetobacco industry’s self-serving proposal for a one pound tax cut which would have led tothousands of extra deaths and drained over two billion pounds from the Treasury.”

Facts:

  • Cost of cigarettes (eg. Benson and Hedges) pre-budget: £3.63 of which £2.34 is duty, 54 pence is VAT and about 75 pence goes to the manufacturer, distribution and retailing.
  • We estimate the 5% real tax increase is about 17.5 pence:
  • Cigarette sales in the UK are about 77 billion per year.
  • Price elasticity of cigarettes is about -0.4 — a 10% rise in price causes a 4% drop in consumption
  • Treasury pre-budget projections assume tobacco duty rises from £8.3 billion in 1998-9 to £8.9 billion in 1999-2000 — £600 million increase coming from increased duty and reduced smuggling. Another c. £2 billion comes from VAT
  • Tax losses (inc. VAT) to tobacco smuggling are estimated by Customs and Excise to be c. £1 billion, up from £720 million in 1997.
  • Tobacco taxes of £10.5 billion are equivalent to about 5 pence on income tax — it is economically beneficial to tax cigarettes rather than jobs and investment
  • The last increase was 21 pence announced in March 1998 and introduced on 1st December 1998. Pre- (last) budget cigarettes are still on the market and the cheapest cigarettes are about £2.80.

 

ENDS

 

Contact Clive Bates, Director (020) 7739 5902
Amanda Sandford (020) 7739 5902 (wk) 0181 257 3501 (hm)

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