Tobacco Manufacturers’ Association States: Raising Tobacco Duty is Economically Illiterate

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Tobacco Manufacturers’ Association (TMA)

16 Mar, 2016, 16:54 GMT

LONDON, March 16, 2016 /PRNewswire/ --

TMA responds to the Chancellor's Budget - 16 March 2016 

Responding to today's Budget announcement, Giles Roca, Director General of the Tobacco Manufacturers' Association (TMA), said:

"Raising cigarette duties by 2% above inflation and hand rolling tobacco by 5% above inflation is prolonging this failing tax policy, which according to the OBR[1] will deliver £5.4bn less in revenue between 2014/15-2018/19. This is due to many consumers inevitably seeking cheaper products elsewhere, adding fuel to the illegal market which cost HM Treasury £2.1bn in 2014/15 alone."

     (Photo: http://photos.prnewswire.com/prnh/20160316/344976 )

"Today's announcement is compounded by the forthcoming implementation of the Tobacco Products Directive, which will see cigarette packs of less than 20 and hand rolling pouches of less than 30gr start to disappear from retailers' shelves from 20 May this year. The Government should have, at least, waited to assess the impact of these changes before raising taxes further. 

Tobacco taxes increased by more than 40% over the course of the last Parliament. In 2014/15 the illicit tobacco market cost the Government £2.1bn in lost taxes, an increase of £500m on 2011/12 figures.


Example of Pre-Budget prices of cigarettes & hand rolling tobacco 

   
               Typical pack of 20 premium               Hand rolling tobacco
                       cigarettes                             (50gr)
    UK                  GBP 9.40               UK            GBP 18.91
    Spain               GBP 3.90               Belgium       GBP  7.00
    Poland              GBP 2.70

Notes to Editors: 

  1. The TMA is the trade association for tobacco companies that operate in the UK. Our members are British American Tobacco UK Ltd (http://www.bat.com), Gallaher Ltd (a member of the JTI Group of companies - http://www.jti.com), and Imperial Tobacco Ltd. (http://www.imperial-tobacco.com)

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1. OBR Economic & Fiscal Outlook 2016 v OBR Economic & Fiscal Outlook 2014     

2. The Office for Budget Responsibility's (OBR) tobacco excise revenue forecasts reveal a downward revision of £5.4bn   

3. HM Revenue & Customs (HMRC) 2014/15 mid-point estimates[2] show that

   
       Mid-point estimates of smuggling & crossborder shopping (non-UK duty paid
                                       - NUKDP)
                  Cigarettes                       Hand rolling tobacco (HRT)
     Smuggling   Crossborder  Total NUKDP     Smuggling  Crossborder  Total NUKDP
        10%           3%          13%            35%          5%          40%

   
        Mid-point estimates of revenue losses from smuggling & crossborder shopping
                                       (GBPmillions)
                                                                              Cigarettes +
               Cigarettes                   Hand rolling tobacco (HRT)          HRT
    Smuggling Crossborder Total NUKDP   Smuggling  Crossborder  Total NUKDP   Total NUKDP
    GBP1,200    GBP400     GBP1,600       GBP900       GBP100     GBP1,000      GBP2,600

4. Further information can be found on the TMA's website - http://www.the-tma.org.uk