Question raised over windfall-tax effectiveness

A ‘windfall tax’ on tobacco companies would lead to the loss of millions of pounds for the UK taxman, according to a report in The Times quoting research by the consultancy, Oxford Economics.

Volumes of UK duty-paid cigarettes and hand-rolled tobacco could decline, leading to a net loss of £167 million if the levy were set at £1 billion, and £28 million if it were introduced at £100 million, Oxford Economics was quoted as saying.

These suggestions came ahead of last week’s deadline for submissions to the government’s public consultation on the introduction of a levy on tobacco manufacturers and importers.

Ministers, who unveiled the proposal in the autumn statement, were said to believe that because smoking imposed costs on society; it was fair to ask the tobacco industry to make a greater contribution.

The Chancellor George Osborne’s announcement followed a declaration by the leader of the opposition Labour Party, Ed Miliband, that, should it come to power following the general election in May, his government would introduce a levy, based on companies’ market share, to raise at least £150 million a year.