Dáil debates
Wednesday, 5 December 2007
Financial Resolution No. 1: Excise (Tobacco Products)
6:00 pm
Bertie Ahern (Dublin Central, Fianna Fail)
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I move:
(1) THAT for the purposes of the tax charged by virtue of section 72 of the Finance Act 2005 (No. 5 of 2005), that Act is amended, with effect as on and from 6 December 2007, by substituting the following for Schedule 2 to that Act:
"SCHEDULE 2
| Rates of Tobacco Products Tax | |
| Description of Product | Rate of Tax |
| Cigarettes .... .... .... ..... ..... | â¬160.57 per thousand together with an amount equal to 17.92 per cent of the price at which the cigarettes are sold by retail |
| Cigars .... .... .... .... .... .... .... | â¬229.917 per kilogram |
| Fine-cut tobacco for the rolling of cigarettes .... .... | â¬194.016 per kilogram. |
| Other smoking tobacco .... .... | â¬159.057 per kilogram |
".
(2) It is hereby declared that it is expedient in the public interest that this resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).
This resolution provides for excise duty increases on tobacco products with effect from midnight tonight. The increases amount to 30 cent, VAT inclusive, on a packet of 20 cigarettes, together with pro rata increases on other tobacco products. The increase will bring the price of a packet of 20 cigarettes in the most popular price category to â¬7.45. It will ensure that taxation policy continues to play a key part, along with the work of the Department of Health and Children and the Office of Tobacco Control, in discouraging smoking. It is among young smokers in particular that price sensitivities are greatest.
It is anticipated that the excise yield from tobacco products will be â¬1.228 billion in 2008. This represents an increase in yield of â¬54 million over the projected figure based on the existing excise rate, with increases in the VAT yield also. The increase is expected to reduce cigarette consumption next year by approximately 1%. I recommend the resolution to the House.
Kieran O'Donnell (Limerick East, Fine Gael)
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We have no great issue with the resolution. However, we believe it might put pressure on many elderly people but we deem the measure constructive from a health viewpoint and we will not oppose it.
Eamon Gilmore (Dún Laoghaire, Labour)
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The Labour Party does not have any objection in principle to this resolution. If I thought it would get Deputy Stagg off the habit, I would propose an amendment to double the increase.
Bertie Ahern (Dublin Central, Fianna Fail)
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We have the same problem with the Minister for Social and Family Affairs, Deputy Cullen, but it does not have much effect.
Eamon Gilmore (Dún Laoghaire, Labour)
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I am not quite convinced these increases in excise duties on cigarettes result in a reduction in cigarette smoking. I know they raise some very healthy revenues for the State, and this measure will raise an additional â¬63 million, but where is the evidence that they actually cause people to give up the fags? We hear this every year and it is very difficult to argue against the case for an increase in excise duty and that it is designed as a health measure. It raises revenue but does it reduce tobacco consumption because I do not see any great evidence that is the case? Perhaps the Taoiseach has some figures which will convince me otherwise.
Apart from that, it has an impact on people who are hooked on cigarettes. I am thinking particularly of older people who have smoked all their lives and who are on small incomes. This is another hit on their relatively meagre incomes. Where is the evidence this is actually working as a health measure?
Leo Varadkar (Dublin West, Fine Gael)
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The evidence is that the amount of tobacco and cigarettes being sold over the past few years has increased. Perhaps I am wrong about that but I am pretty sure it is the case that there has been an increase. The excuse given is that a large number of people have come here from central and eastern Europe, that they smoke a lot and that is the reason for the increase. I am, however, a bit sceptical that is the case.
The Taoiseach said he expected a 1% decrease in consumption. What were the estimates in previous years in respect of decreases in consumption? Did they prove accurate? Obviously, the purpose of levying increased taxes on tobacco is as a sin tax and it is, therefore, only effective if it reduces consumption and is not successful if it only increases revenue.
There is a large number of boxes of cigarettes which have stamps on them. What measures will be put in place to ensure cigarette manufacturers and potentially retailers do not cash in on those cigarettes stuck in the middle, so to speak, between the new and the old regimes?
Emmet Stagg (Kildare North, Labour)
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As somebody who has smoked a considerable number of cigarettes for a long time â in fact, for as long as I can remember â so far they have not seemed to have had all the adverse effects we have been told they have.
Seán Power (Kildare South, Fianna Fail)
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The Deputy might not be the best judge.
Emmet Stagg (Kildare North, Labour)
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I will keep my fingers crossed and enjoy smoking in the meantime.
If it was intended that this measure would have the effect of preventing people from smoking, we would see a reduction in income to the State and not an increase. However, this is a farce. A 30 cent increase will not stop anybody buying a packet of cigarettes but a â¬3 increase might do so. If we put a â¬3 increase on a packet of cigarettes, we would see a reduction in revenue to the State from cigarette smoking.
Emmet Stagg (Kildare North, Labour)
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I would support that because I do not believe people should smoke if they can possibly avoid doing so. People are addicted to the damn weed. It is a very severe addiction and I say that from experience.
It is a nonsense that this is a health measure. It is not a health measure; it has no effect on the consumption of cigarettes because it is a small amount. It will bring in â¬63 million in one year. If it was effective, it would reduce the amount of money coming to the State. However, it is not effective and the Department of Finance can happily predict that it will increase the amount of revenue to the State by â¬63 million.
Seán Sherlock (Cork East, Labour)
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The measure will probably have a positive effect in so far as it will discourage potential new smokers. If the price of cigarettes was prohibitive, it would probably have that effect. However, if one is a committed smoker, it will not change one's behaviour at all. If it is proposed as a health measure, the Government must look at the issue of smoking cessation. If some of these moneys could be diverted to smoking cessation measures, then perhaps it would be seen as a more productive move.
I also urge the Government to look at nicotine replacement substances, such as gums and patches, which are very prohibitively priced. Their sale is also restricted in that they are only available in pharmacies, although they are widely available in supermarkets and multiples in other mainland European countries. If one is to discourage people from smoking, one needs to look at the distribution of those products as well.
Arthur Morgan (Louth, Sinn Fein)
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We support the resolution. I feel a little sorry for smokers who already must endure inclement weather when they are otherwise enjoying themselves in order to get a bit of what was described as the "dreaded weed".
John O'Donoghue (Kerry South, Ceann Comhairle)
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When it rains, it pours.
Arthur Morgan (Louth, Sinn Fein)
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That is the way it comes, as the Ceann Comhairle knows.
On many occasions I have heard the organisation ASH call for an increase in the price of cigarettes because it suggests that it deters people from starting to smoke. Dr. Fenton Howell, who heads up that organisation, used to be with the North Eastern Health Board before he moved on to those greener pastures. I accept that argument.
Will the â¬63 million, which will be raised in 2008, go straight to the Exchequer or is there a prospect that it might be ring-fenced for lung cancer or cardiovascular treatments associated with cigarette smoking, for example?
John Curran (Dublin Mid West, Fianna Fail)
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I am glad Members on this side of the House are getting an opportunity to contribute to this debate. I support the resolution. I wish to take up a point Deputy Stagg made. He mentioned that a 30 cent increase on a packet of 20 cigarettes might not be a sufficient deterrent from a health point of view and he would have preferred if it had been â¬3. I concur with that view.
John Curran (Dublin Mid West, Fianna Fail)
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I am not a smoker.
We had a debate earlier about the competitiveness of the economy and inflation. It is important to point out that this product plays a significant part in the consumer price index. I agree wholeheartedly with what Deputy Stagg said. We should remove this product from the consumer price index. The type of approach the Deputy suggested, which would be hugely beneficial from a health point of view, could be taken without having an adverse effect on the economy. If we leave this product in the basket of goods which make up the consumer price index, then we cannot do what the Deputy suggests without other consequential effects which we cannot determine. I agree with the principle of what the Deputy suggested but I support the resolution.
Michael Mulcahy (Dublin South Central, Fianna Fail)
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I support the proposal for a 30 cent increase in the price of a packet of cigarettes. It is very difficult to decide on the amount by which one should increase excise on cigarettes. In last year's budget, there was a larger increase. I am aware of the issue of contraband. If the increase is too high, there will be more smuggling and more cigarettes will be sold on the black market. There is always a fine balance to be struck between what one wants to achieve socially and financially.
I am sure Deputy Stagg did not mean to say smoking is harmless or to send out that message. There should be a very clear message from everybody here that smoking is very bad for one's health and, therefore, I concur with those speakers who would, by and large, favour a larger increase in excise duties. As I say, contraband is one issue.
There is also the question of freedom of choice. I also support the principle that people have the freedom to choose whether they want to use cigarettes. As a society, we must never be too heavy-handed in telling people what they can and cannot do, as opposed to telling people what they should and should not do. In all the circumstances, I support the proposal from the Government.
Paul Kehoe (Wexford, Fine Gael)
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I see the Taoiseach has not turned to cigarettes over the past number of weeks with all the pressure he is under. I do not think he will turn to them now. I very much welcome the increase in excise duties on cigarettes.
This country has come a long way in the past number of years with the smoking ban. The ban has helped many people to give up cigarettes.
Emmet Stagg (Kildare North, Labour)
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It has led to an increase in the number of people smoking.
Paul Kehoe (Wexford, Fine Gael)
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I do not know about that but I thinkââ
Emmet Stagg (Kildare North, Labour)
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It has led to an increase in the numbers because they are all outside pubs having a good chat.
Paul Kehoe (Wexford, Fine Gael)
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I very much welcome this measure in respect of people's health. I would have gone a little bit further but that is not the way. Overall, I very much welcome this measure.
Bertie Ahern (Dublin Central, Fianna Fail)
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I will give the bad news first. Obviously, I hope Deputy Stagg, the Minister for Social and Family Affairs, Deputy Cullen, and others avoid it but the international statistic is that half of all smokers will die from smoking-related diseases. Unfortunately, that is a constant figure in this country and elsewhere.
Mary Harney (Dublin Mid West, Progressive Democrats)
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We hope Deputy Stagg is the right half.
Bertie Ahern (Dublin Central, Fianna Fail)
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I do not wish to in any way depress the Deputy but that is the figure. I will try to answer some questions. Deputy Varadkar and others asked about the statistics. I think I have stood here for probably 15 out of the past 17 years to speak about this issue and we say the same things. Consumption is falling in spite of the increased population and, as Deputy Varadkar correctly stated, the fact there are more eastern Europeans here. Consumption is down from 7 billion five years ago to 5.35 billion this year. I was surprised by these figures.
Eamon Gilmore (Dún Laoghaire, Labour)
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Does that refer to the number of cigarettes?
Bertie Ahern (Dublin Central, Fianna Fail)
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Yes. Even in terms of the population, it is having an impact. Information from very extensive surveys that have been carried out by the Office of Tobacco Control indicates that the proportion of the population that smokes is 24%. This compares with 27% five years ago and 31% eight years so it is coming down proportionally as well.
Of course, the survey shows the proportion of smokers varies considerably between age groups, with the highest incidence being among young people between 19 and 35. Some 32% of them smoke. The logic put forward by the Irish Cancer Society and others is that by bringing in this tax, the quartile of the people one affects consists of young people. If they do not take it up when they are young, one has a chance of that running through. Alternatively, if they get into it when they are young, one will never get them out of it or, at least, it will be a far more difficult challenge. There is a very high incidence of smokers in the 15 to 18 age group â the percentage is over 17%. While the overall downward trend in the number of smokers is welcome, it reflects the wide range of measures taken over the years to discourage the habit and the scale of the threat it still poses to public health.
Today's increase of 30 cent will ensure taxation policy continues to play the part about which I spoke and it should be particularly helpful in discouraging younger smokers. That is really the challenge. Consumption fell by 5% last year and, hopefully, the figure for this years will be 1%. I suppose that 1%, like everything else, always sounds a bit meaningless but a fall of 1% represents 59 million less cigarettes. Even if we do not include a few of our colleagues, it is still a fair cut in consumption.
In respect of excise duties on tobacco, fiscal policy is part, of course, of the overall health strategy aimed at discouraging smoking through other means, increasing prices in real terms. Groups like the Irish Cancer Society and ASH say the increase should be far larger. The Irish Cancer Society would like us to increase it by â¬2. I have tried for many years in different capacities to get the social partners to agree that, like other countries, we could leave it out of the inflation figures. If we get agreement across society, we could do this and it would have a far more significant effect.
In fairness to Deputy Stagg, he is consistent in his argument that it would have a bigger effect but, obviously, inflationary pressures do not allow us to do that. The Minister for Health and Children, like previous Ministers, would argue for a far higher increase but we just cannot do it in circumstances where it would have an inflationary effect, which would not work well for the economy. Other countries have managed to deal with that. We try that on a regular basis and tried it again this year but it is just not a runner.
In respect of illegal tobacco products, the Revenue Commissioners continue to implement measures to combat this threat. These measures include continuing seizures of illegal products, prosecution of offenders, monitoring the Internet sites, instigating test purchase to identify the importation routes, monitoring of sales patterns to identify and investigate irregularities, targeting enforcement activity and action taken at EU level to improve the controls of excisable products in the community. All of these measures are being taken to curb it.
Leo Varadkar (Dublin West, Fine Gael)
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I was referring to cigarettes where the tax has already been paid and the stamp is already on them and where the retailer tomorrow will charge 30 cent more even though the tax has already been paid.
Bertie Ahern (Dublin Central, Fianna Fail)
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Monitoring of that takes place every year. This is not to say some will not try it. I remember when the increases were bigger years ago. They tried to hike up their own purchases in advance. I do not think there is as much of that as there used to be.
There is ongoing monitoring of international courier and air freight. Of course, the indicative limit of 800 cigarettes is used by the customs service to determine the legitimate import of cigarettes. However, an individual is entitled to import more than this if they can prove when questioned that this amount is for personal use, which is a bit strange.
The 13% increase raises the CPI by one fifth of 1% â 0.2% â but it is important that we support policies to reduce the incidence of smoking. It is having an effect but there is no doubt we could introduce larger increases if it did not effect the CPI.
I have said over a number of years that there is a problem with the illegal importation of cigarettes. We have the second highest excise content and retail price in the EU after the UK. There are vigorous efforts to combat this smuggling and there has been a huge amount of seizures this year. Up to the end of October, just short of 13,000 seizures were made, yielding 56.7 million cigarettes with a retail value of â¬19.4 million. This is big business and the smugglers are still there. Over 10,200 seizures were made from postal consignments and almost 2,300 were airport seizures. The cigarettes seized had a combined retail value of around â¬12.3 million. Seizures at sea ports yielded a smaller amount.
There have been over 110 convictions this years, including convictions for street trading. We have also brought in Operation Hawkeye as part of which more than 300,000 cigarettes were seized in the period from August to October, with 200,000 cigarettes and 90 kg of roll-your-own tobacco being recovered on one premises alone.
Eamon Gilmore (Dún Laoghaire, Labour)
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Did the Taoiseach say something about grow your own?
Bertie Ahern (Dublin Central, Fianna Fail)
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It was roll-your-own tobacco.
Eamon Gilmore (Dún Laoghaire, Labour)
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I think the Taoiseach is right. I am becoming deaf.
Bertie Ahern (Dublin Central, Fianna Fail)
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One could be growing it too.
I thank Members for their support but as they can see, we are having an effect in overall figures and percentage terms. If there were a larger increase it would have a greater effect. We must seek agreement for that.
Bertie Ahern (Dublin Central, Fianna Fail)
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All the money we gain goes on the health budget.
John O'Donoghue (Kerry South, Ceann Comhairle)
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Deputy Gilmore, there will be a few people growing their own.
Eamon Gilmore (Dún Laoghaire, Labour)
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That is what worries me.