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Tobacco industry increases prices beyond tax change requirements – study

Price rises challenge the industry’s argument that government-backed hikes push consumers towards the illicit market, a report suggests.

Price rises on cigarettes and roll-your-own tobacco products have gone beyond tax changes even when they have been large and unexpected, a study found (Action on Smoking and Health/PA)
Price rises on cigarettes and roll-your-own tobacco products have gone beyond tax changes even when they have been large and unexpected, a study found (Action on Smoking and Health/PA)

The tobacco industry is increasing prices beyond that required by tax changes, challenging its long-standing argument that government-backed hikes push consumers towards the illicit market, a report suggests.

Price rises on cigarettes and roll-your-own tobacco products have gone beyond tax changes even when they have been large and unexpected, according to a study funded by the National Institute for Health Research (NIHR).

Roll-your-own (RYO) tobacco had the highest industry-driven price rises, despite higher levels of illicit trade for these products, the research, published in the British Medical Journal’s Tobacco Control, found.

Researchers at the University of Bath and King’s College London analysed UK data on inflation, tax rates, and sales of RYO tobacco and manufactured cigarettes between 2010 and 2015.

The paper said the tobacco industry regularly increased cigarette prices over and above the level required by tax rises before 2010 in Britain and Ireland, accounting for almost 50% of the total price increase in the UK.

If the tobacco industry was really concerned about higher prices driving the market for illicit tobacco, they would only increase their prices whenever they were forced to do so by higher taxes Dr Rob Branston, University of Bath

Since then, manufactured cigarette sales had fallen by 17%, while sales of cheaper RYO products had increased by 46%.

However, the Government had been reluctant to increase taxes further on RYO for fear of pushing smokers towards the illegal market, which is already larger than that for manufactured cigarettes, the study claims.

Between 2010 and 2012, when there were large and unexpected tax increases, industry-driven price changes were small, accounting for 16% and 20% respectively of the price increases in manufactured and RYO tobacco.

But from 2013 to 2015, when tax increases were smaller and planned, a third (33%) of the price increase for manufactured cigarettes was industry-driven, rising to nearly half (48%) of the price hike for RYO tobacco.

Dr Rob Branston. from the University of Bath. said: “If the tobacco industry was really concerned about higher prices driving the market for illicit tobacco, they would only increase their prices whenever they were forced to do so by higher taxes.

“But the results of our paper show that the industry has a track record of going beyond tax rises when it comes to price increases in order to enhance their profits.”

The researchers have previously argued that taxation on tobacco is the “best weapon” against smoking and in reducing its public health burden.

PA

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