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UNTAXING TOBACCO

The state should forget about putting additional taxes on smokers as a way of raising more money, according to a new report from the Revenue.

Increased taxation on cigarettes would only exacerbate the problem of smuggling or legal importation from abroad and the state might actually end up losing revenue rather than gaining it. While conceding pushing up the price is effective in encouraging more people to quit, it would be far better to introduce non-pricing measures such as the smoking ban, the Economics of Tobacco report concludes.

Padraic Reidy and Keith Walsh of the Revenue’s research and analytics branch, examined the factors affecting tobacco consumption in Ireland between 2002 and 2009 and a synopsis of their findings are published in The Sunday Business Post.

The authors concluded that price was the most important factor determining consumption levels. A 1% increase in price led to a 3.6% decrease in the consumption of taxed cigarettes.

“The most reasonable theory to explain such a large decrease in taxed consumption is that only part of the reduction is caused by lower smoking levels,” the report says. “The remainder must be caused by smokers switching to substitute cigarettes.”

Revenue believes around 20% of cigarettes smoked in Ireland are not taxed here. Although smoking is declining, the tax take for the government from the evil weed is still over €1 billion every year.

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