Opening Statement by the Irish Heart Foundation and Irish Cancer Society
to the Joint Oireachtas Committee on Health and Children
Thursday, 8th November 2012
Chris Macey, Head of Advocacy, Irish Heart Foundation
Thank you, Mr. Chairman. On behalf of the Irish Cancer Society and the Irish Heart Foundation, I welcome the opportunity to discuss our joint pre-budget submission.
Today, we want to make you aware that the tobacco industry is earning huge profits in Ireland. More profit than in other European countries. We are asking you to think about how this impacts on our efforts to reduce the smoking rate in Ireland and to support our recommendation that the profit of the tobacco industry is greatly reduced.
We estimate that by taking this single recommendation on board, Government could net around €150 million a year. We propose that the tobacco industry starts to pay for a larger proportion of the harm it causes.
For illustrative purposes, €150 million would cover the wages of 4,167 extra nurses, 4,853 new primary school teachers, 5,480 new Garda recruits, 7,188 new Special Needs Assistants; 165,000 extra hospital bed days, or 100 new MRI scanners.
Traditionally we have always focused on taxing smokers. It’s now time that the tobacco industry’s huge profits are cut. The additional revenue that would be collected by Government could be invested in helping people to quit.
In Ireland, the Government has been taking about 79% of the price of a packet of cigarettes in tax. The rest of the price goes to the tobacco industry. In the UK, the Government has taken about 90% of the price of a packet of cigarettes, leaving the tobacco industry with a much smaller profit margin. In monetary terms, the tobacco industry has been earning roughly €1 more per packet of cigarettes in Ireland than it does in the UK.
So why is it the case that in Ireland, the tobacco industry takes such a larger margin?
The reason is that every year, the tobacco industry increases the price of cigarettes, regardless of whether the Government increases tax or not. This means that their profit margin gets bigger and it is virtually unnoticed by the smoker who thinks it’s Government tax that is increasing the price.
We know from Freedom of Information requests that the tobacco industry consistently lobbies against price increases at Budget time. They claim that a higher price will increase the smuggling rate. We cannot emphasise strongly enough that this is simply not the case. If the tobacco industry genuinely thought that, why would they have increased the price of cigarettes every year for the last 10 years? This is a duplicitous industry that cares only about profit. It uses these profits to undermine and find ways around the Department of Health’s tobacco-control regulations.
In our Pre Budget Submission we recommend that Government appoints a regulator who would determine a profit level for the tobacco industry that is more in line with other consumer products. This simple initiative, which has worked effectively for other industries, would mean the tobacco manufacturers had less money to invest in smooth marketing techniques, public relations agencies and other initiatives aimed at undermining the Government’s efforts to reduce the smoking rate.
Smoking is one of the greatest public health challenges of our time. We have to do what we can so that the tobacco industry is not profiting from tobacco sales while the State picks up the bill. The tax receipts from smoking do not come close to covering the cost of tobacco on our society.
Last year the State took in €1.36bn in tobacco tax. But the Department of Health says that at current smoking rates, tobacco-related illness will cost the State €23 billion in the next 10 years. This means the taxpayer is subsidising tobacco industry profits to the tune of almost €1bn a year.
If we keep on using traditional ways to tackle an evolving and slippery industry, we simply won’t win the battle against smoking. We need new thinking and this is why we want you to take this issue on and support our efforts to increase revenue for Government in a time when it needs it most.
John McCormack, Chief Executive, Irish Cancer Society
Our Pre Budget Submission does not stop at this ground-breaking recommendation though. We also need to focus on the basics. For instance, we do not have a National Tobacco Strategy. A Strategy that incorporates high regular taxation, reduced tobacco industry profits, tough anti-smuggling measures and concerted smoking cessation measures will hugely reduce the human and economic impact of smoking.
Other countries have shown that you can impose big tax increases on cigarettes and reduce smuggling at the same time where the will and leadership exists.
In the UK, for example, through regular tax increases above inflation over the last 10 years, major brand cigarettes are now more expensive than in Ireland –more than €9.30 at current exchange rates, compared to €9.20 here. In this time the UK smuggling rate has fallen from 21% to 9% - less than half the rate here.
So the next time tobacco industry front groups like Retailers Against Smuggling (RAS) tell you not to increase the taxes that hit their funders in the pocket, please remember whose interests they are protecting.
We urge the Government to commit to an annual price escalator for tobacco taxes on all tobacco products (including hand-rolled tobacco) of at least 5% per year above the rate of inflation.
This has been proved the world over to be the most effective way to reduce smoking rates – especially among teenagers. But this will only be effective if we tackle the illicit market that provides easy access to cheap tobacco that negates the effect of higher prices.
Our template for action is provided by the UK which had roughly the same smoking and smuggling rates a decade ago as we have now. By combining high regular tax increases, tough anti-smuggling measures and effective stop-smoking strategies, they now have two million fewer smokers, including a 50 per cent reduction among children, while the illicit market has fallen from 21 to 9 per cent. And for an annual outlay of £300 million, tax revenues have risen by £1.2 billion, whilst health service savings total £1.7 billion.
A crude estimate of what this could achieve in Ireland based on the UK experience suggests that an outlay of €8 million a year, would return extra revenue of €130 million to the Exchequer each year.
High smuggling rates must be tackled to cut off the supply of cheap tobacco that is increasing numbers of young smokers. We must give Customs, which has lost hundreds of staff in recent years, and the similarly hard-pressed Garda, the manpower and equipment, along with the tough justice in the courts, required to deal with smuggling. And we must give greater support to free more smokers from the grip of addiction.
If such co-ordinated action is taken we can effectively tackle the health catastrophe that costs this country one of its citizens roughly every 90 minutes and massively increase tax revenue and cost savings for Ireland’s cash-starved health service. We need new thinking about tobacco in Ireland and with this in mind, we ask each of you to endorse our Pre Budget submission and make its contents become reality.
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