Tobacco firms 'push up prices despite no tax hikes'
TOBACCO companies have been accused of trying to lobby various finance ministers into not imposing budget tax hikes on cigarettes -- in order to profit from their own price increases.
The Health Service Executive (HSE) said it wanted "at least" a 50 cent increase in the cost of a packet of 20 cigarettes and other tobacco products in the December Budget.
In a letter to Finance Minister Michael Noonan it produced an analysis of Government tax increases on tobacco products -- and the hikes by companies themselves -- over the course of a decade.
It showed that in 2000 a packet of cigarettes was €4.77. And while the Budget spared the "old reliable" from any tax increase that year, the trade put on another 10c.
In 2001, the government lobbed another 13c on to a packet of cigarettes but the trade hiked the price by a total of 21c.
In 2004 and 2005, there were no tax rises on cigarettes but the tobacco companies added 30c to the price over the course of the two years.
The letter from HSE public health director Dr Patrick Doorley said the evidence was that the tobacco companies lobbied against government taxes so that "they could reap the rewards directly of any price increase which they thought the market could bear".
He added: "It is also notable that the tobacco industry has maintained its own percentage share of the price and, hence profits, throughout the world.
"At a time when many businesses have to make significant sacrifices in the face of our economic downturn, it appears the tobacco industry is working assiduously to protect its margins.
"Their strategy of constantly increasing prices, irrespective of their rhetoric on smuggling, needs to be examined in light of the forthcoming Budget."
The international evidence fully supported such a measure and claims from the tobacco industry that tax increases inevitably lead to increased smuggling were not borne out by either the evidence or their own behaviour in regard to price hikes, Mr Doorley added.
Commenting on the HSE's analysis, a spokesperson for Irish Tobacco Manufacturers' Advisory Committee said: "Over €1bn has been lost to the Irish economy in the past two years because of the huge number of cigarettes consumed in Ireland that avoid paying Irish taxes.
"This money is not only being lost to the Irish economy but it is helping to fund criminal gangs across the country. The current cost of a packet of cigarettes is €8.65 per pack of 20, of which 79pc goes to the Government or about €6.83.
"This is €6.83 that the Government will lose out on per packet if they push more people towards the illegal cigarette market with increases in excise."