Dáil debates

Tuesday, 11 October 2016

Financial Resolutions 2017 - Financial Resolution No. 1: Tobacco Products Tax

 

9:25 pm

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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I move the following Financial Resolution:



(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 be amended, with effect as on and from 12 October 2016, by substituting the following for Schedule 2 to that Act (as amended by section 45 of the Finance Act 2015 (No. 52 of 2015)):

“SCHEDULE 2 RATES OF TOBACCO PRODUCTS TAX

(With effect as on and from 12 October 2016)

Description of ProductRate of Tax
CigarettesRate of tax at­-

(a) except where paragraph (b) applies, €288.22 per thousand together with an amount equal to 9.52 per cent of the price at which the cigarettes are sold by retail, or

(b) €325.11 per thousand in respect of cigarettes sold by retail where the rate of tax would be less than that rate had the rate been calculated in accordance with paragraph (a).
CigarsRate of tax at €335.368 per kilogram.
Other smoking tobaccoRate of tax at €310.189 per kilogram.

Rate of tax at €232.664 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).
Financial Resolution No. 1 provides for excise duty increases on tobacco products with effect from midnight tonight. The increase amounts to 50 cent, inclusive of VAT, on a pack of 20 cigarettes in the most popular price category, together with pro-rata increases for other tobacco products. The price of a pack of cigarettes in the most popular category, assuming the increase is passed through to the final retail price, will increase to €11. The excise duty component of this price will be €6.81 and the total tax inclusive of VAT will be €8.87, which represents nearly 80.6% of the price of a pack.

Ireland is committed to a policy of high taxation of tobacco in order to encourage people to quit smoking, particularly younger people. The policy is working. In 2007, 24% of our people were daily smokers but today Department of Health figures show that the figure has fallen to 19%. Furthermore, the quantity of cigarettes consumed per smoker has also fallen in the period. Increasing tobacco products taxation is a key public health policy measure to continue this downward trend in smoking rates in Ireland and to help us to achieve a tobacco-free Ireland by 2025.

In terms of revenue raising, the increase in excise duty on tobacco products will contribute €5.7 million to the Exchequer in 2016 and €65.2 million in a full year.

Photo of Billy KelleherBilly Kelleher (Cork North Central, Fianna Fail)
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We will support the financial resolution as it is a public health measure. All sides of the House are in agreement that we need to continually pursue the aims and objectives of a tobacco-free society by 2025. This will be a huge challenge because we are dealing with an addictive substance, namely, nicotine and that leads to a broader debate on how we encourage people to give up and not to take up cigarette smoking in the first place. While the downward trend is very positive, there are concerns that, particularly among younger girls, there is a propensity to take up smoking and that is an area that needs to be addressed with broader policy initiatives. There will be broader support for sending out a strong message that we want to discourage as many people as possible from taking up cigarette smoking and to discourage those who are already smoking. That is easier said than done, however, and we need to assist people with supports, such as giving people on medical cards access nicotine substitute products. We need to do a lot more in this regard. All the measures to date, from graphic images on our cigarette packets to the broader efforts to make smoking unattractive, must be vigorously pursued over the next number of years. Whether we are on target or not, every person who gives up smoking or does not take it up is a bonus, so these policies are welcome.

We can broaden the debate out slightly to health policy in terms of alcohol, obesity and drug addiction, and there is a lot of work to be done in those areas. In this context, the revenue raising measures should be directed towards health policy initiatives. With an overall tax take of €8.87 on a pack of cigarettes, we need to ring fence at least some of that to promote healthy lifestyles and well being and to support those who want to give up but find it very difficult. We will support this resolution in order to send out a strong message from this House that this is a health policy initiative which has worked to date, along with the smoking ban and broader policy initiatives.

Photo of Mick BarryMick Barry (Cork North Central, Anti-Austerity Alliance)
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The Anti-Austerity Alliance-People Before Profit will be opposing this motion. We agree entirely that tobacco products and cigarettes are harmful and damaging, they cause cancer and heart disease and they kill. However, while the price is undoubtedly a factor in whether someone buys a pack of cigarettes, the fact that people are addicted leads to price inelasticity and not many people give up on a product as they do on other products when the price is increased by a similar margin. There are other ways to reduce the number of people who smoke. For example, cessation programmes could be run through the health service. A total of €5.54 billion was raised in tobacco taxes by the State between 2011 and 2015 but a mere €33.7 million of that was used for cessation programmes. That is 0.6% of the total moneys raised. The Taoiseach says this is about encouraging people to quit smoking. If the State fully took on board its responsibilities to encourage people to quit smoking, a far greater proportion of the taxes raised on tobacco could be used for education programmes and cessation programmes, as well as Quitline, nicotine patches, etc. The fact that this is not done begs the question of whether this is more of a revenue grab by the State than a health measure.

The price increases in recent years have also had the effect of boosting the black market for tobacco products. It is reckoned that in 2007, 6.7% of tobacco products purchased in the State were purchased on the black market. By 2009, that had risen sharply to 19.8% and by 2014, it had risen again to 23%. Nearly a quarter of all tobacco products in the State in 2014 were bought on the black market and the year on year tax increases have been a significant factor in that.

These tax increases are regressive and people on low incomes are hit hard by the policy and it is a key reason we are opposing it.

10 o’clock

I reiterate that these are harmful, damaging products that kill people. We want to see far less smoking and use of tobacco products within society but we believe the key way to do this is through proper funding of the cessation programmes rather than a regressive tax which hits people hard, particularly people on low incomes.

9:35 pm

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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We will be supporting this measure. The Irish Heart Foundation and the Irish Cancer Society have consistently called for comprehensive, accessible supports to help people to quit smoking. In their view, what is required is a community-based approach. We support the direction of money towards that aim and to Customs and Excise to help it tackle the smuggling of vast amounts of cigarettes and other more harmful substances into this country.

I accept it is difficult for people to quit smoking. Most people in this House, including myself, will have smoked at some point. It is a pretty difficult habit to give up and we should acknowledge that. However, the response cannot be just a revenue raising exercise. It must include the public health component everyone else has talked about. My father died from lung cancer. To see somebody for months on end struggling to catch a breath should be enough to convince people that they should not begin smoking in the first instance. The evidence is that a constantly expected increase in the price of cigarettes is a deterrent. The ambition for Ireland to be a country that does not have people who are dependent on cigarettes should be, and is, a legitimate ambition. We should do whatever we can to get to that point.

Photo of Aengus Ó SnodaighAengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Tá mé chun chur i gcoinne an rúin airgeadais seo maidir le hardú cánach ar tabac, toitíní agus a leithéid. Ní hé go bhfuil mé i gcoinne an pholasaí ó thaobh sláinte poiblí. Tá mé go huile is go hiomlán i bhfábhar pholasaí atá curtha chun cinn chun iarracht a dhéanamh an drochrud seo maidir le tabac atá á dhéanamh thar na cianta sa tír seo a bhriseadh sa deireadh thiar thall. Ach má tá rún airgeadais os ár gcomhair atá ann díreach ar mhaithe le cáin a hardú seachas polasaí sláinte poiblí a chur chun cinn, tá muid chun chur ina choinne.

Ní léir domsa sa mhéid atá ráite anocht nó níos luaithe go bhfuil aon rud ann a chinnteoidh go mbeidh breis airgid dírithe ar déileáil le drochstaid ár gcórais sláinte. Ní léir domsa, ach go háirithe, go mbeidh an t-airgead tuillte faoin rún seo, nó an cháin ar tabac ina iomlán, curtha ar leathtaobh nó i gciste áirithe chun déanamh cinnte de go mbeadh sé dírithe ar chóras nó ar fheachtas poiblíochta dírithe orthu siúd atá ag caitheamh tabac nó orthu siúd a bhíonn ag díriú ar a leithéid mar atá déanta cheana. Ba chóir go mbeadh sé dírithe ar na hábhair atá ann chun cuidiú le daoine atá gafa ag an tabac éirí as é a chaitheamh - ar nós paistí Nicorette - chun go mbeadh na hábhair sin níos saoire agus go mbeadh níos mó fáil orthu.

Níl muid i gcoinne an pholasaí, ach níl aon rud curtha faoinár mbráid inniu a léiríonn go mbeidh aon tionchar mór ar mhaithe le sláinte poiblí ag an ardú cánach seo. Measaim go bhfuil dallamullóg i gceist arís. Tá sé déanta le tamall de bhlianta anuas, ní díreach ag an Rialtas seo ach ag Rialtais roimhe seo trí ardú cánach a chur ar tabac, leis an dallamullóg curtha acu go mbeadh an t-airgead sin le bheith caite ar aon bhealach ceart. Is cuimhin liomsa an argóint seo a dhéanamh beagnach deich mbliana ó shin. An freagra a bhfuair mé ag an am ná nach bhféadfadh an Rialtas sin cáin a cheangail ar bhealach amháin nó ar bhealach eile. Ach is féidir nuair is mian leis an Rialtas. Sin an rud nach bhfuil ag tarlú anseo. Déantar é i gcás na cánach atá gearrtha orthu siúd atá ag cur bets ar chapaill nó a leithéid. Cuirtear é sin ar leaththaobh agus tagann an Rialtas os comhair na Dála gach bliain chun déileáil leis an tuarascáil bliantúil ar conas mar atá an t-airgead sin caite. Ní dhéantar an rud céanna i gcás na cánach ar alcól, toitíní, tabac nó a leithéid sin.

Bheadh sé difriúil dá mbeadh sé faoinár mbráid agus leagtha síos go díreach anocht cá rachadh an t-airgead a bheadh tuillte ón gcáin seo. Níl sé iomlán soiléir go díreach cé mhéad airgead a bheidh tuillte as seo. Nuair a chuirtear an cheist ar na Coimisinéirí Ioncaim, níl siad cinnte. Deir siad go dtiocfaidh méid áirithe as ach go gcaithfear breis airgid a chaitheamh ina threo chun é a thuilleamh. Chomh maith leis sin, toisc go bhfuil an praghas ag ardú, b'fhéidir go n-éireoidh daoine as an tabac, ach b'fhéidir nach n-éireoidh. B'fhéidir go mbeidh i bhfad Éireann níos mó den smuigléireacht ag tarlú, mar atá tarlaithe le blianta. B'fhéidir fiú go mbeadh níos mó daoine atá ag taisteal thar lear ag tógáil an méid is mó toitíní ar ais leo is gur féidir. Bhí mé thar lear le déanaí agus bhí gach uile duine a bhí ag taisteal ar ais go hÉireann ag ceannacht toitíní i stáit Eorpacha eile agus iad i bhfad níos saoire ná mar atá siad in Éirinn.Tá dallamullóg á dhéanamh againn muna bhfuil na cánacha céanna á gcur ar ghnéithe cosúil le tobac agus alcól, srl., ar fud an Aontais Eorpaigh. Is féidir leis an ngnáthdhuine atá ag taisteal chun na hEorpa timpeall 800 toitín a thógaint isteach. Tá caillteanas i gceist ós rud é go gcosnaíonn 200 toitín thart ar €40 sa Spáinn ach thart ar €110 sa tír seo, agus i bhfianaise gur féidir le daoine sé nó seacht paicéad a thógaint isteach. Níl mé cinnte faoi na figiúirí sin toisc nach gcaithim tobac. Má tá difríocht de €70 i gceist ar gach paicéad, is caillteanas mór é do na Coimisinéirí Ioncaim. Má ardaíonn an Rialtas an cáin seo mar atá beartaithe gan an ardú céanna i dtíortha eile, beidh níos mó daoine ag iompórtáil toitíní sa chaoi atá luaite agam. Tá súil agam nach n-éireoidh leis an gcinneadh seo anocht.

Photo of Maureen O'SullivanMaureen O'Sullivan (Dublin Central, Independent)
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I agree with everything the Taoiseach said in terms of this being a public health issue. We know the effects, physically and economically, on society of smoking. I would like to see a tobacco-free Ireland. We know the health risks of smoking and I acknowledge the work of the Irish Heart Foundation in this regard. We also know the statistics for those who smoke and get lung cancer and so on. It is great to hear about the downward trend in smoking. However, I believe the reason for the downward trend is due not to the price of tobacco and cigarettes increasing but to the many good preventative programmes in place to help people to quit. Having worked with young people, I know that for girls and increasingly boys, body image is an important issue. Following this line, in terms of health initiatives for young people would be far more effective.

When it comes to addiction, and smoking is an addiction, we are very reactive but not nearly good enough on prevention. As we know, prevention is the Cinderella of the national drugs strategy. I hope that in the new strategy we will see far more emphasis on prevention in education, including in relation to the use of tobacco products. We need to look at what is working and what is not working in terms of young people and smoking. I might have been inclined to vote for the increase if I thought the revenue raised from it would go directly into preventative measures but we know that that does not happen. I am fortunate that I have never smoked.

I know and am surrounded by people who smoke and acknowledge the difficulty for them. Ironically, the packet of cigarettes is the only companion of those on lower incomes. It is a very sad indictment of our society that we hear people saying that. It is those on lower incomes who are most affected.

I have had several meetings with Retailers Against Smuggling, a number of whom are in my constituency. We know about the illicit trade and the losses to the economy. There are regulations and fines in place, but there is great difficulty in enforcing them on the illicit tobacco trade. At least if one buys a packet of cigarettes officially, one knows what one is getting. If one is buying illegally over the Internet, one does not know the content of what one buys. The bottom line is that a packet of cigarettes costs €11 in a shop but only €4 or €5 on the black market. We know where people are going to go and, as such, I do not see the measure contributing to a decrease in the number of smokers.

9:45 pm

Photo of Michael HartyMichael Harty (Clare, Independent)
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It will come as no surprise to the House that I will vote in favour of this resolution. Smoking is a huge health hazard. It is the cause of many cancers including lung and throat cancer and the cause of chronic obstructive airways disease which is a huge burden on the health service. It is one of the most destructive habits one can take up. It is a huge health problem. It amazes me how many people smoke in the Houses of the Oireachtas. The smoking area is well occupied most days of the week. The health effects of smoking are incontrovertible. The price should have been increased by €1. We should have put an extra 50 cent on cigarettes and taken 50 cent off the prescription charge, which would have been a far more progressive health measure.

Photo of Mattie McGrathMattie McGrath (Tipperary, Independent)
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Hear, hear.

Photo of Michael HartyMichael Harty (Clare, Independent)
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Education is the way to go on dealing with the cigarette issue. The cost of cigarettes is one element in getting people off smoking, but education in primary and secondary schools is also very important. The pressure from young children who come home to their parents having learned of the dangers of smoking in school is very significant. Education is a key aspect of reducing the health hazard posed by cigarettes. Cigarettes are a drug of addiction. They are very addictive. If one has tried to get people off cigarettes, one will know it is very difficult. It is a social, psychological and physical addiction. If one can prevent that by stopping people smoking, all the better. There are social aspects to smoking. It is a social expression of one's individuality and youth to take up cigarettes. It is anti-establishment. We should tackle smoking in that sense as well as by banning completely the advertising of cigarettes. If one looks at the success of the smoking ban introduced in 2004, one sees that it was self-policing. It was an instant success. While we are not discussing other drugs this evening, alcohol and sweet drinks are also huge social issues. We should introduce an awareness of alcohol, which is probably the single most destructive drug in Ireland, vastly outweighing that of illegal drugs. It was disappointing that there was no increase in the excise duty on alcohol this evening.

Photo of Donnchadh Ó LaoghaireDonnchadh Ó Laoghaire (Cork South Central, Sinn Fein)
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Ba mhaith liom cur leis an méid atá ráite ag an Teachta Ó Snodaigh i dtaobh an rúin seo. Ar an gcéad dul síos, ba mhaith liom giota de phíosa próis a rinne an Teachta Ó Dochartaigh trácht ar níos luaithe a léamh. To read a short passage:

Forecast receipts of tobacco products tax use an elasticity measure to partially reflect the responsiveness (or change in behaviour) of smokers following duty and price changes. Increases in duties are forecast to lead to increases in receipts, albeit recognising that some smokers will consume less and consequently some of the increases in receipts from higher prices are negated. Further cigarette price rises, particularly at the higher end, may not increase Excise receipts and this is indicated through the use of the range of estimates above. To reflect the potential variations in consumption change in smokers, the range above is based on varying the elasticities used in the forecast calculation. The elasticities used are derived from research conducted by Revenue.

Those are not my words, but rather represent the opinion of the Revenue Commissioners. We are supposed to believe the increase will bring in the absolute maximum point on the range of results the Revenue Commissioners have predicted. The Revenue Commissioners say that increasing the price of cigarettes will bring in a maximum of €65 million but could cost €44 million. That is a range of €109 million. At no point have they said that any particular point in that range was more likely than another. This point was raised by Deputy Pearse Doherty during the earlier debate and the Taoiseach had an opportunity to clarify it. He has not done so. If there is another opportunity to clarify how the figure was arrived at, it should be taken.

This resolution is in the context of a budget and paying for essential services. My party and I are on record as supporting the use of price increases as a health measure to tackle smoking. Clearly, we remain committed to that position in accordance with our pre-budget submissions over many years. However, that is not what we are voting on tonight. This is a vote on a financial resolution and part of the budget. To explain it in the simplest terms for anyone listening or the Deputies in the House, if an Opposition party suggested a policy that could raise €65 million or cost €44 million, it would not constitute a credible submission to Government as a manner in which to fund essential day-to-day services or capital expenditure in the budget. It might be different if it was a specific health measure ring-fenced to tackle smoking, but that is clearly not the case here. Ultimately, it is wishful thinking and probably a desperate measure to back up other commitments that this level of spending was chosen. It seems the sums arrived at were necessary to arrive at the final sum in the budget. While Sinn Féin supports price increases to tackle smoking, which is a significant social ill that causes disease and illness and does great damage to many families, this measure sets a bad precedent and is poor practice. Consequently, we will vote against it.

Photo of Mattie McGrathMattie McGrath (Tipperary, Independent)
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I am pleased to get a few moments to speak on the motion. I said earlier that I would be supporting it because it is one facet of our attempts to deal with the chronic issue of smoking and the legacy effects it has on households and on both heavy and passive smokers. It saddens me that, notwithstanding increases over the several budgets while I have been a Member of the House, smoking has still not abated. To see young people from the end of national school right through to third level continuing to take up smoking, given its cost, is sad. This trend is only getting worse. I listened to Deputy Harty speak from a medical perspective and it is clear that we know the damage and serious illness caused by smoking. We have all known people who can hardly speak because they are short of breath and in a bad way due to lung disease from smoking and it is sad.

We must have better awareness campaigns and we must get into the schools, particularly our national schools, to get the young people to teach some of us older people not only about smoking but other bad habits too. I find in the case of Tidy Towns and the campaign for a clean environment that it is the young people who are teaching the older people how to mend their ways. They tap us on the shoulder if something is being done which should not be. I have great faith in the young people. Mol an óige agus tiocfaidh sí. They will teach us. We must ensure that the money garnered from this measure tonight is ring-fenced for cancer care groups and other anti-smoking campaigns.

Every day of the week, hospices, cancer care groups and the community at large provide support and wonderful work is done by voluntary organisations. Despite this, cigarettes are still being peddled and sold.

Many colleagues who told me they would vote against the resolution raised an issue of which I am aware. Will the trade go underground completely? Will cigarettes be sold in a similar manner to substances sold on the black market? Evidence has proved that severely damaging ingredients are in black market cigarettes. People think they are getting a bargain, but they are coffin nails, as Woodbines were called at one time. It is a very serious issue.

It is important that the money is ring-fenced and there are proper health and awareness campaigns. We saw the effects of the smoking ban. Last week I travelled to a place where smoking was allowed in restaurants and bars and it was horrific. We are lucky, because the health of people and the staff and management of premises were damaged by passive smoking. We need to do an awful lot more, but we need to ring-fence the money.

I would agree with another increase of 50 cent if it meant decreasing prescription charges by 50 cent. In some cases, people require prescriptions because of the damage done by smoking. It is a counter argument. I would support a measure to lessen the impact of prescription charges via this tax. That did not happen. Sin scéal eile. I will support the measure.

9:55 pm

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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Gabhaim buíochas le gach éinne a labhair ar an rún seo. I thank Members. Deputy Kelleher spoke in respect of this being a public health issue, which it is. That has clearly been the focus of all Governments over the years. Deputy Barry referred to a proper cessation programme. The programme is working reasonably well. Deputy Murphy mentioned patients who die from cancer, of which there are 5,200 each year. Everybody knows somebody who has had to deal with this problem and are suffering from it. The health benefits of not smoking are exceptional. Labhair an Teachta Ó Snodaigh go maith as Gaeilge.

Deputy O'Sullivan mentioned that prevention programmes could be better and that, in particular, education needs to focus more on this. Deputy Harty spoke of the nature of the cancers this brings about. We recall advertising and then smoking being banned in certain venues, which everybody supported and which has made such a difference to meeting rooms throughout the country.

Deputy Ó Laoghaire mentioned the difference in interpretation of the 50 cent increase and that it might result in a decrease in revenue of €44 million. The Revenue Commissioners ready reckoner on that score provides for a range within which an increase in excise and tobacco may result in increased or reduced revenue revenues. It reflects the possibility that an increase in the price of cigarettes could result in a disproportionate change in consumer behaviour. The Minister for Finance has made no secret of the fact that in recent years increases in excise duty on tobacco have been testing the boundaries of diminishing returns. However, to date the revenues from tobacco have been holding up and the increases provided for in recent years using the same price elasticity used for the 2017 forecast have been realised, and the predictions for 2016 point to a similar outcome.

It has to be pointed out that increases in tobacco excise, as well as raising revenues, are designed to meet the health objectives of reducing smoking prevalence. On this basis, any reduction is more than compensated for by the health benefits and consequent savings that will arise in the health sector. In the budget announced today, there is a significant first element of Healthy Ireland dealing with smoking, obesity, diet, activity, energy and all of the things that have a bearing on the mental and physical well-being of our population. Deputy McGrath referred to ring-fencing this money.

It is important to note that more than 2,000 people, between Revenue and Customs, are involved in the detection of smuggling which is a sophisticated business with lucrative rewards. Obviously, the seizures of cigarettes over recent years says it all. The strategy that Revenue and Customs employ includes a range of measures that are designed to complement each other in identifying and targeting the supply and demand sides of the market for illicit tobacco products with a view to seizing those illicit products and prosecuting those responsible. The key elements of that are developing and sharing intelligence on a national, EU and international basis, developing analytics and detection technologies and ensuring the best appointed resources at the point of importation and inland to intercept and seize illegal products and detect and prosecute those involved.

There is an incentive to bring non-Irish duty-paid tobacco products into the State from other states. Under EU law, a person may bring in duty-paid tobacco products purchased in another member state without paying Irish tax provided the cigarettes are purchased for the person's own use and are transported and accompanied by that person. Recent surveys by Revenue suggest some 6% of cigarette consumption in Ireland is accounted for by such purchases abroad. The quantity of cigarettes that a person may bring into the State duty-free from outside the EU for personal use or from territories where EU rules on VAT and excise duty do not apply is limited to 200.

Since 1 January 2014, Ireland has utilised what is known as Article 46 of the EU excise directive of 2008 which allows member states to impose a quantitative restriction of 300 on the number of cigarettes that may be brought in from those member states, that is, Bulgaria, Croatia, Hungary, Latvia, Lithuania and Romania, that have not yet notified the Commission that they have reached the EU minimum tobacco product tax levels. These member states are expected to achieve those minimum tax levels by 31 December 2017.

I could go on, but we have listened carefully to the suggestions made by Deputies. I thank them for their contributions.

Question, "That Financial Resolution No. 1 be agreed to", put and declared carried.