Tobacco tax keeps on rising as revenues go up in smoke

TMA responds to the Chancellor’s Budget – 18 March 2015.

Responding to today’s Budget announcement, Giles Roca, Director General of the Tobacco Manufacturers’ Association (TMA), said:
 
“The decision to increase tobacco duties by 2% above inflation is simply a continuation of a failing tobacco tax policy, which according to the OBR [i] is now expected to deliver around £6bn less in revenue over the course of the next Parliament. At the same time the illegal market is clearly growing as price conscious consumers seek cheaper products elsewhere. The illegal market cost HM Treasury £2.1bn in 2013/14 and whilst we recognise the Government’s commitment to a renewed Anti-Illicit Tobacco strategy, further tax rises will simply undermine these efforts.”

“The announcement of further tax rises is compounded by the Government’s decision to push ahead with plain packaging of tobacco products. T he regulations make no allowance for the continued use of an on-pack security and authentication tool which has been voluntarily developed and implemented by industry and is now being used by HM Revenue & Customs.  We said all along that plain packaging will be a gift to the criminal gangs (ii) who wish to flood the UK market with cheap, counterfeit tobacco and the Government is helping to make this a reality.”

According to HMRC’s Measuring Tax Gaps Report (iii), in 2013/14 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

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

2. The Tackling Tobacco Smuggling strategy was unveiled in March 2000, with further revisions taking place in March 2006, November 2008 and April 2011. The Government is expected to announce a revised strategy in 2014

3. The Office for Budget Responsibility’s (OBR) tobacco excise revenue forecasts reveal a continuous downward revision

4. HM Revenue & Customs (HMRC) 2013/14 mid-point estimates (i) show that:

5. Further information can be found on the TMA’s website – www.the-tma.org.uk