Ms Kathleen O'Meara:

I thank the Vice Chairman and members for the opportunity to address them today on the joint submission being made to the Government by the Irish Cancer Society and the Irish Heart Foundation on this year's budget. Our submission concerns tobacco. We have four recommendations: the regulation of the tobacco industry in Ireland; ensuring tobacco tax increases benefit the Exchequer, not the tobacco industry; a price escalator for tobacco taxes; and a comprehensive tobacco smuggling strategy. I will comment on the first two recommendations and my colleague, Chris Macey, from the Irish Heart Foundation will address the remaining two.
Why are health charities appearing before a finance committee to talk about tobacco tax? It is because our objective, which is to continue to cut the smoking rate in Ireland, cannot be achieved unless the tobacco industry is controlled here, specifically with regard to how it operates in the market and the profits it makes. Three big international tobacco companies dominate the market in Ireland - British American Tobacco, Japan Tobacco International and Imperial Tobacco.
Dr. Robert Branston, an economist at the University of Bath, has conducted research which shows that these tobacco firms enjoy profits of 55%, after duties on sales in Ireland. He estimated that in 2011 their combined profits in Ireland were €104 million after tax. This is about three times the profits enjoyed by the food and alcohol industries. These are supernormal profits. We propose that the State intervenes in the tobacco market by appointing a tobacco regulator, with the purpose of curbing the excessive profits of the industry here in Ireland. This could yield up to €65 million to the Exchequer. In 2011, total tax receipts for tobacco here were €1.42 billion, while the cost of smoking-related illness to the Exchequer is estimated to have been approximately €2 billion. This figure comes from the chief medical officer of the Department of Health. Therefore, the tax collected from the industry does not meet the cost of caring for those people whose health has been ravaged by their addiction to tobacco.
Our second proposal is for the adjustment of the structure of tobacco tax to ensure that when tobacco tax is increased, it benefits the Exchequer, not the tobacco industry. What we seek is an increase in the specific tax on cigarettes, with a corresponding decrease in the ad valorem tax. Specific tax is levied on the volume of cigarettes sold, while ad valorem tax is calculated on the price of cigarettes. Currently, the specific tax is 65% of the total price of a cigarette. What we ask is that it be raised to its maximum possible level of 76.5%. What this will mean is that tobacco profits are squeezed, with more revenue to the Government.