Ms Kathleen O'Meara:

I thank the Chairman and members of the committee for the opportunity to address them on the joint submission being made to the Government by the Irish Cancer Society and the Irish Heart Foundation to this year's budget. I will speak on behalf of both organisations, and Mr. Chris Macey of the Irish Heart Foundation and I will take members' questions afterwards.

Our submission concerns tobacco and we have four recommendations: the regulation of the tobacco industry in Ireland, ensuring tobacco tax increases benefit the Exchequer and not the tobacco industry, a price escalator for tobacco taxes, and a comprehensive tobacco smuggling strategy. Why do health charities concern themselves so much with tobacco? Our objective is to continue to cut the smoking rate in Ireland, and it cannot be achieved unless the tobacco industry is controlled here, specifically in how it operates in the market and the profit 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 in the UK, has conducted research which shows that these tobacco firms enjoy profits of 55% after duties on sales in Ireland. He estimated that their combined profits in Ireland in 2011 were €104 million after tax, which is about three times the profits enjoyed by the food and alcohol industries. Those are super-normal 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. This could yield up to €65 million to the Exchequer. In 2011, total tax receipts for tobacco were €1.42 billion while the cost of smoking related illness to the Exchequer is estimated to have been around €2 billion, so 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 to adjust the structure of tobacco tax to ensure that when tobacco tax is increased, it benefits the Exchequer, not the tobacco industry. We seek an increase in the specific tax on cigarettes, with a corresponding decrease in the ad valoremtax. Specific tax is levied on the volume of cigarettes sold, while ad valoremtax is calculated on the price of the packet of cigarettes. That would mean tobacco profits are squeezed, with more revenue to the Government.

Third, we are calling for an annual tobacco tax escalator of at least 5% above inflation in tandem with a national anti-smuggling strategy. This would bring a 60 cent tax increase this year. We stress that the smuggling rate is not the 30% plus claimed by the tobacco industry and the groups it funds. The real rate is provided through IPSOS MRBI research for the Revenue Commissioners, and last year smuggling fell to 13% from 15% in 2011. That is still unacceptable, but if high tax fuels smuggling as some people claim, that has not been the UK experience where the smuggling rate has fallen from 21% to 9% in the past ten years, while tax increased by 77%, making UK cigarettes dearer than here.

Committee members may have heard that tobacco companies and their front groups criticise tax increases, but over the past decade the rate of industry increases has been higher. Therefore, while the Government has made small increases, the industry has in fact made its own, and in some cases higher, increases.

We want increased resources to tackle smuggling. It is important to know that Revenue estimates that 87% of smuggled tobacco is the product of the legal industry getting into the supply chain and just 6% is counterfeit, so supply chain control is a key issue. In the past, cheap tobacco jurisdictions have been knowingly flooded with cigarettes which are then smuggled into other European countries. We need extra detection equipment, such as scanners in our ports, in addition to more supply chain controls. In addition to tackling supply, we must address demand, and our proposals include the introduction of legislation to make buying illicit tobacco a criminal offence. We need to be aware that industry-sponsored lobbying on tobacco tax is aimed solely at maintaining its extraordinary profit levels at the expense of the public purse and, of course, public health.