Philip Morris and ASH want government to increase tax on cigarettes
Saturday, March 4, 2017 at 13:50
Simon Clark

Gotta love Philip Morris.

The world's biggest tobacco company certainly knows how to grab a headline.

Three months ago when Andre Calantzopoulos, PMI's chief executive, announced that he wanted to work with governments to "phase-out" conventional cigarettes it was a huge story and his comments were reported worldwide.

Today the Telegraph reports:

The world’s biggest tobacco company has for the first time asked to be taxed more by Chancellor Philip Hammond – to encourage smokers to switch to healther alternatives.

Philip Morris, which makes brands such as Marlboro, said it backed an increase in taxes on its cigarettes as part of its bid to move to a “smoke-free future”.

According to UK managing director Peter Nixon:

“We want to move towards a smoke-free future and a lot of that is incentivising people to move across from cigarettes to something that is less harmful.”

To avoid any misunderstanding, I don't have a problem with any tobacco company developing 'safer' products that give consumers more choice. Quite the opposite. I welcome it.

I do however have an issue with anyone who supports an increase on what is already punitively high taxation on cigarettes and rolling tobacco because we all know who will bear the brunt of that increase – the consumer.

And let's be clear. When the Chancellor raises the tax on cigarettes by inflation plus two percent or worse (the so-called tobacco escalator) on Wednesday it will have very little impact on PMI whose market share in the UK is less than ten per cent.

The groups that will suffer most are small retailers (who may lose business to the black market) and law-abiding smokers, especially the less well-off, who don't want to quit or switch to alternative nicotine products.

Remarkably I see very little difference between PMI's call for higher taxes on combustible tobacco and ASH's pre-Budget statement that calls on government to increase the tobacco tax escalator from two per cent to five per above inflation.

In contrast, City AM yesterday reported that:

The Tobacco Manufacturers' Association [which represents Imperial, JTI and British American Tobacco] said the government's policy of increasing taxes on tobacco above the rate of inflation each year has already pushed British consumers into the black market, and the group called for the government to scrap the tobacco duty escalator.

Or, to put it another way:

The TMA is urging the government to adopt a “more effective tax policy”, starting with the removal of the excise duty escalator, in which the tax on tobacco products rises by 2% above inflation every year.

TMA director general Giles Roca said: “Tobacco taxation in the UK is the highest in Europe thanks to successive government’s raising tax notably with an-above-inflation escalator, meaning that on some of the lowest-priced cigarettes, tax can account for 90% of price.

“This simply encourages people to buy from the black market and takes business away from the legitimate trade,” he says. “The government therefore needs to review its approach to tobacco taxation, starting with ditching the failing escalator and it could usefully do this at the upcoming Budget.”

See Trade urges government to re-think tobacco tax policy (Talking Retail).

Clearly the message didn't reach PMI or, if it did, they ignored it.

So here's an idea. Prior to the autumn Budget perhaps Philip Morris and ASH should consider a joint submission to the Chancellor.

That way smokers will know exactly where they stand, and who their friends are.

Article originally appeared on Simon Clark (http://taking-liberties.squarespace.com/).
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