UK tax-increase plan would be counterproductive

The UK’s Tobacco Manufacturers’ Association (TMA) has said that a call by the All-Party Parliamentary Group on Smoking and Health to increase the rate at which tobacco taxes are increased is based on economic illiteracy.

According to a BBC story, the tax rate is increased by two percent above inflation each year, but the group wants that raised to five percent.

In a report that will be submitted to the treasury’s Comprehensive Spending Review, the group said that such an increase would generate an extra £100 million annually to spend on anti-smoking projects, and double the rate of decline in smoking.

In response, Giles Roca, director general of the TMA, said the proposals in the group’s report were counterproductive and based on economic illiteracy.

“Every time taxation is increased on tobacco it loses the treasury millions that could have been spent on public services,” he said. “That’s because tax on tobacco has increased by over 40 percent over the last five years, making UK tobacco the most expensive in Europe.

“Smokers are then increasingly switching to cheaper and often illegal products, which loses the Treasury some £2.6 billion each year.

“Small shops also suffer as they struggle to compete with illegal traders selling products at less than half the legitimate retail price.”

Roca said that the UK’s high tax policy provided a clear incentive to organised criminals, who didn’t care who they sold to; as was evidenced in a recent survey by Trading Standards North West that had revealed a disturbing upturn in children gaining access to illegal tobacco products.

“Rather than imposing yet more tax on a legitimate UK sector, which directly and indirectly supports over 60,000 jobs and generates over £12bn in tax revenue, the UK government would be better served by holding an independent review of tobacco tax policy.”