Mr. Niall Cody:

I have been at this committee previously talking about the rates of excise duty, VAT and the tax element of a packet of cigarettes, and there are important health drivers. Every year, in the context of the budget, the Minister has to weigh both those issues and every year the various NGOs, such as the Irish Heart Foundation and the Irish Cancer Society, will strongly recommend a significant increase in excise duty on cigarettes. I am sure committee members hear the same views. On the opposite side, as I said, the industry wrote to give out to me because the various retail interests and tobacco manufacturers keep emphasising the challenge of smuggling.

The standard increase in recent years has been 50 cent per pack of 20 in excise duty, which puts us at the highest end of the price. In the tax ready reckoner that we publish, it is the only area where we build in an elasticity and we give a range of possibilities, along the lines, "It could lead to..." In recent years, the budget figures have been achieved but they have been achieved in a strange way in that there have been significant fluctuations in releases of legitimate tobacco because of various health packaging arrangements. This year we are well below the tobacco tax figures compared to forecast. Because Ireland is a relatively small market, none of the cigarettes is manufactured in Ireland and it is not like it used to be. The production of legitimate cigarettes for Ireland can be done in some of the factories in a couple of weeks in a quantity that will last months, and the releases then follow. However, over a four or five-year period, the tax receipts come in on target. Obviously, it is a policy issue and a health issue, and there is a balance to be struck.

During the few years in which the duty was not increased the tobacco companies increased their prices.