A strategy to reduce
smoking rates and increase
tobacco tax revenue
Tobacco: deadly and addictive
16 people die every day from the effects of smoking. Tobacco kills more people in
Ireland than road accidents, suicides, drugs, farm accidents and AIDS put together.
As the leading advocates in the battle against tobacco in Ireland, we believe the
Government must do all it can to encourage and support the 1 million people in
Ireland who currently smoke to stop because half of all smokers will die of smoking,
and of them half will die prematurely.
Smoking causes 30% of all cancers, including 95% of all lung cancers. Overall 6,000
people die in Ireland every year from smoking-related illnesses including cancer,
heart and respiratory disease. Smoking is also one of the major risk factors for
cardiovascular disease – people who smoke have a three-fold risk of heart attack
compared to non-smokers and smokers are twice as likely to have a stroke as non-
Since our Budget 2010 campaign, the economic situation both at home and abroad
has further deteriorated and we know that the pressure on the public finances is
acute. We also know that the Government is considering a range of measures
designed to raise much-needed revenue. Our proposal will not only have a massive
benefit to public health, but will also generate the revenue to pay for itself.
Our organisations have consistently argued that a three pronged approach is
required to tackle smoking prevalence – price increases for tobacco products,
comprehensive smoking cessation programmes and stronger smuggling controls.
These actions will only have the desired effect if introduced simultaneously.
Our priorities for Budget 2011:
1. Increase tax on loose tobacco to the same level as cigarettes by placing an
additional 50 cent on a pouch of loose tobacco, generating approximately
€7.5 million. Increase tax by 50 cent on a packet of 20 cigarettes, generating
approximately €77.8 million additional revenue.
2. Ring-fence €12 million from the extra Exchequer receipts to fund a major
programme of cessation activities.
3. Invest in a comprehensive package of measures to tackle tobacco smuggling,
which could potentially save the Exchequer approximately €67 million each
SECTION 1 – Increase tax on tobacco
Research conducted by the World Bank indicates that price increases are the most
effective single measure to encourage smokers to quit and are particularly successful
in discouraging younger people from starting to smoke. In higher income countries,
such as Ireland, a price increase of 10% would be expected to decrease consumption
A reduction in tobacco consumption on this scale would have a significant effect on
smoking related illness over many years, which the Chief Medical Officer in the
Department of Health and Children has said is costing the country around €2 billion
per annum. Whilst our organisations strongly disagree with the Department of
Finance’s previously expressed analysis that tax levels in Ireland have been
responsible for high smuggling rates, the fact that illicit sales now appear to be
stabilising, or even falling, means that this does not have to be an issue influencing a
decision on tobacco tax rates.
I. Standardise tax levels on loose tobacco:
Demand for loose tobacco is increasing all the time. In 2009 alone demand for roll
your own tobacco increased by 55% from 2008. For the first half of 2010, demand
has remained high. In fact, revenue from loose tobacco sales is projected to be over
€35 million this year. In 2009, sales of loose tobacco exceeded 2008 figures by more
than €20 million.
At the minimum, tax on this product should be brought to the same level as that for
cigarettes, which is just under 80% of the total price (tax on loose tobacco is
currently about 60% of total price).
To harmonise these tax levels, the Government would need to increase the
tax on loose tobacco by 50 cent to €3.25 per 12.5 g pack.
This means that the tax per kilogram of loose tobacco as measured in the
budget needs to be increased by €40 in the next Budget. Bringing the tax on
loose tobacco to the same level as cigarettes has the potential to yield over
II. Increase in tax on cigarettes:
The Government made over €1.22 billion in 2009 (2008 – €1.18 billion) from the
sale of tobacco products.
Revenue from tobacco sales for 2010 is projected to be near or below 2009
We are recommending a 50 cent increase in the tax on a packet of cigarettes. This
measure has the potential to be a significant revenue-raiser.
A 50 cent increase would yield extra receipts of €77.8 million, according to figures
compiled by the Department of Finance1.
SECTION 2 – Helping people to quit smoking
We are not proposing this price increase without due consideration and would not
be asking for it unless it was going to make a real difference in the fight against
cancer and all the other smoking related illness. Price acts as a real disincentive for
young people taking up smoking and is an incentive for those who want to quit.
But our Government needs to step in and do more to help those who want to quit.
To date, the Government has happily received huge tax revenues from smokers but
Parliamentary Question – Department of Finance Tax Yield, 15 June 2010.
has not funnelled a significant proportion of this money into assisting those wishing
Currently, the Irish Government spends 89 cent p/a per capita on tobacco control
and quitting smoking initiatives in comparison to the UK which spends €1.79 p/a per
capita. Irish smoking rates remain stubbornly high at 29%, while in the UK they have
fallen to 21%2. There is no reason why a portion of the money raised from a cigarette
price increase could not go towards community programmes to help people to quit.
Funding smoking cessation and awareness programmes works. To use an
international example: a study of the California tobacco control programme from
1989-2004 showed that the state saved $86 billion in health costs, with an
investment of just $1.8 billion over the 15 year time period.
Use additional revenue for smoking cessation
o The European Cancer League (ECL) and the European Network of
Smoking Prevention (ENSP) regularly review progress on tobacco
control in 30 European countries. One of their recommendations is
that countries should spend a minimum of €3 per capita per year on
tobacco control by 2010. This would bring spending in Ireland to
€12m per annum.
o In the US, the Centers for Disease Control and Prevention make
recommendations on each state’s per capita spend on tobacco
control. Kentucky is of comparable size to Ireland (4.31 million) and in
2007, based on its particular characteristics, it was advised to spend a
total of $13.59 per capita on tobacco control programmes, $4.67
(€3.37 approx) of which to be specifically used for cessation
o The Irish Government spends approximately €2 billion annually
treating smoking-related illnesses, while the per capita spend on
tobacco control programmes was just €0.89 in 2007.
o We advocate an annual spend of €12m on tobacco control. This fund
should be easily available and ring-fenced from the substantial
revenue generated from tobacco sales and which would be
considerably enhanced by a tobacco price increase.
This funding should be utilised to provide a suite of supports for people who want to
quit, such as access to smoking cessation services in their community, ready
availability of cessation aids (nicotine replacement therapies, etc.) and peer support
through ‘quit groups’. A significant proportion of this annual spend should be
allocated to a multimedia campaign to help smokers quit. This will drive smokers
wanting to quit to the National Smokers’ Quitline.
UK Office for National Statistics, Smoking habits in Great Britain 2007,
SECTION 3 – Tackling tobacco smuggling
Based on 2009 receipts, the Department of Finance estimates that the Exchequer
loses €200 million3 in duty each year due to the illicit trade in tobacco. The indirect
costs are considerably higher. With contraband accounting for 20-25% of all tobacco
consumed in Ireland, there is a ready supply of cheap non duty paid cigarettes.
The IHF and ICS propose the following initiatives be introduced in Budget 2011 to
tackle tobacco smuggling. Reducing illicit sales, combined with the extra revenue
from penalties and fines could save the State approximately €67 million per annum.
1. Introduce and provide funding for a national anti-smuggling strategy.
2. Introduce penalties for tobacco companies whose products are smuggled.
1. Introduce and provide funding for a national anti-smuggling strategy
Anti-smuggling initiatives in other jurisdictions have significantly reduced tobacco
smuggling and have increased the revenue raised by the State from tobacco taxes.
Following the roll-out of a National Anti-Smuggling Strategy in the UK the illicit
tobacco trade was cut by one third, and the amount of revenue lost to smuggling
was reduced by £1 billion per annum.
The Revenue Commissioners are understaffed following significant reduction in
recent years. Recent approval by the Department of Finance for the appointment of
200 new staff4 needs to be balanced against the fact the Revenue lost 500 staff in
2009 due to incentivised retirement and non-replacement5. The successful
introduction of an anti-tobacco smuggling programme will necessitate additional
staffing for investigations and surveillance in the illicit tobacco division and a
significant proportion of the new hires should be ring fenced for this purpose.
Potential for huge savings by tackling smuggling
In July 2010, the Revenue Commissioners undertook a national tobacco blitz. The
seizures made during these two weeks clearly illustrate that a coordinated smuggling
strategy would significantly cut the illicit tobacco trade and bring more revenue into
Results of the National Tobacco Blitz Statistics, July 10 th- 25th, 2010
Product Number of Quantity Retail Value (€m)
Cigarettes 561 13,719,472 5,830,775
Tobacco 47 195kgs 69,941
Source: Revenue Commissioners, August 2010.
If this level of activity was maintained over 52 weeks, the results could mean a
combined seizure of cigarettes and tobacco at a retail value of €153.4m6.
PQ, Department of Finance, Excise Duties, 30 Sept. 2010
The Irish Times, 22 April 2010. Company closures hit tax take.
Revenue Commissioners (2010). Annual Report 2009.
These figures are based on the seizure levels from the 2 week blitz in July 2010.
2. Introduce penalties for tobacco companies whose products are smuggled
A penalty directed at tobacco companies whose products are smuggled should be
introduced in the Finance Bill 2011.
It is extremely debatable whether the tobacco companies are doing enough to
combat smuggling – it is not in their commercial interest for smuggling to reduce. If
anything, tobacco companies can benefit from smuggling in four ways:
They profit from the selling of their cigarettes whether through the black
market or through legitimate channels;
Smuggling ensures a supply of cheap cigarettes which help keep wavering
Any smuggled cigarettes which are seized by customs need to be replaced in
order to meet demand for the product, thus meaning that the tobacco
companies earn profits twice on seized cigarettes; and, most importantly;
It allows them to argue for reduced taxation (and therefore increased
consumption) in the legal market (ASH UK, 2003).
A penalty directed at tobacco companies whose products are smuggled should be
introduced in the Finance Bill 2011. The Government in Britain came to view
Memorandums of Understanding (MOU) with tobacco companies as unenforceable,
non-binding agreements, which depend for their effectiveness on goodwill. As a
result, the UK government introduced legislation to make measures to combat illicit
trade enforceable. The UK Finance Act 2006 makes it a legal duty for tobacco
manufacturers not to facilitate smuggling and manufacturers who fail to take
sufficient steps to prevent their products being smuggled into the United Kingdom
face fines of up to £5 million.
Who we are:
The Irish Heart Foundation is the national charity supporting people with heart,
stroke and blood vessel disease. The Foundation promotes policy changes that
reduce premature death and disability from cardiovascular disease. We support
pioneering medical research, campaign for improved patient care and provide vital
patient support and information.
Established in 1963, the Irish Cancer Society is the national cancer care charity. Our
vision is that every person in Ireland will have access to the best possible cancer
services; will have the lowest risk of getting cancer, the highest survival rates and the
best support and information available when affected by cancer. Our goals are
cancer prevention, early detection and fighting cancer with three programme areas
to achieve them: advocacy, cancer services and research.
Ash UK (2003). Tax and Smuggling – Frequently Asked Questions. Available at
Centers for Disease Control and Prevention (2007). Best Practices for Comprehensive
Tobacco Control Programs—2007. Atlanta: U.S. Department of Health and Human
Services, Centers for Disease Control and Prevention, National Center for Chronic
Disease Prevention and Health Promotion, Office on Smoking and Health.