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Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
Making the Tobacco Industry Pay, Ms. Rachel Foley - European  Week Against Cancer 2013
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Making the Tobacco Industry Pay, Ms. Rachel Foley - European Week Against Cancer 2013

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  • 1. Making the Tobacco Industry PayMs. Rachel FoleyPolicy & Public Affairs Manager, Irish Cancer Society
  • 2. Making the tobaccoindustry payRachel FoleyPolicy and Public Affairs ManagerIrish Cancer Society
  • 3. Joint Proposal• Branston, R. & Gilmore, A. (2010) ‘The case for OFSMOKE: how tobacco priceregulation is needed to promote the health of markets, government revenue andthe public’. Tobacco Control, doi:10.1136/tc.2009.034470.• Branston, R. & Gilmore, A. (2013) ‘The case for Ofsmoke: the potential for pricecap regulation of tobacco to raise £500 million per year in the UK’. TobaccoControl, doi:10.1136/tobaccocontrol-2011-050385Based on the work of UK academics, Dr Robert Branston &Professor Anna Gilmore, Bath University
  • 4. “These companies remain some of themost profitable in the world. This isthanks in part to their endlessinventive ways of undermining andcircumventing regulation.” AnnaGilmore, University of Bath, UK, 2011
  • 5. What’s the problem?MarketpowerPricingpowerHigh pricehightaxesSignificantprofits
  • 6. Price of a packet of 20 cigarettes netof tax in 27 EU countries, July 2011
  • 7. Tobacco industrySmallnumber ofcompaniesAbility tomanipulatepriceProfitsequal toCoca-Cola, Microsoft andMcDonalds
  • 8. A duplicitous industry
  • 9. Our approachTobaccoregulatorTaxstructureTaxescalatorTaxhand-rolledtobaccoIllicittrade
  • 10. IrelandProfits =€100 milliona yearProfit margin= 26-55%Governmentrevenuecouldincrease by€41-60million a year
  • 11. Market share and profitability2011 Imperial JTI BAT Total tobaccoindustry profitsMarket Share 33% 46% 10%Revenue(after VATand duty)€79,777,706 €112,184,988 €34,538,000 €226,500,694Profitactuallymade€32,973,449 €62,280,000 €9,003,000 €104,256,449Operatingprofits41% 55% 26%
  • 12. A tobacco regulatorNewapproachCapprofitsCoverlegitimatecostsPaid forby thetobaccoindustryCould beextendedbeyondprice
  • 13. 2011Imperial JTI BAT Total tobacco industry profits33% 46% 10%€79,777,706 €112,184,988 €34,538,000 €226,500,694€32,973,449 €62,280,000 €9,003,000 €104,256,44941% 55% 26%€15,955,541 €22,436,998 €6,907,600 €45,300,139€17,017,908 €39,843,002 €2,095,400 €58,956,310€9,573,325 €13,462,199 €4,144,560 €27,180,084€23,400,124 €48,817,801 €4,858,440 €77,076,365Impact of price regulation 2011Optimistic scenario(12% profit)Conservative scenario(20% profit)Reduction in Profits due to regulation €77,076,366 €58,956,310Implied reduction in corporate tax @12.5% €9,634,546 €7,369,539Cost of regulator €7,000,000 €10,000,000Potential net increase in tax revenue to Exchequer €60,441,820 €41,586,771
  • 14. BenefitsMarkettransparency– shieldsGovernmentfromindustrylobbyingRemoveprice asmarketingtoolLess moneytounderminetobaccocontrolpolicies,lobby anddevelop newproductsAdditionalrevenue forGovernmentCorrectmarketfailure
  • 15. Could thesebenefits beachieved through adifferentmechanism?
  • 16. Wholesale price Total taxRetail priceProductionCostsIndustryprofit (incl.retailmargin)Advaloremexcise tax(9%)Specificexcise tax(65%)Sales Tax(23%)79%21%Tobacco tax structure
  • 17. Specific TaxCalculatedon volumeMaximumallowablelevel =76.5%CouldincreaseGovernmentrevenuewithoutincreasingpriceIndustrycouldabsorb taxincreaseReducedown-trading
  • 18. RevenueCommissionersPriceelasticityofdemand:-3.6LandmarkEconomicsPriceelasticityofdemand:-0.5FrankChaloupkaPriceelasticityofdemand:-1 to -2.3Why not a price increase?
  • 19. Structure of taxShould notfacilitate theintroductionof economyproductsShould notencouragepricecompetitionShould notallow tobaccoindustry toabsorb taxincreases onthe cheapestbrands
  • 20. PallMallReported that PJCarroll wasreducing therecommendedretail price forPall Mall by 50cent from €7.75to €7.25: ‘Lessmoney morequality’.BensonandHedgesAn example ofproductinnovation isBenson &Hedges’ ‘B&H BigBox’ in which a23-cigarette boxis being sold for€9.75.MarlboroGoldTouchRetailing for€7.80 and isdescribed as ‘aninnovative newdimension insmoking: slightlythinner thanMarlboro GoldOriginal...’.But doesn’tIreland have thehighest price inEurope at€9.20?If the tax structure changed, the price of cigarettes would be relatively uniform
  • 21. Tax EscalatorReal pricehasn’t keptpace withnominalpriceHigh pricebut averageaffordabilityCPI + 5%Becomepolicy in theUK
  • 22. Loose tobaccoSalesincreasedby 71% in2009Tax only60% ofretailprice1 pouch= approx.25cigarettesfor €4.25
  • 23. SmugglingIncreasespending by€8m peryearImproveenforcementMake itillegal to buysmuggledtobaccoDe-linksmugglingfrom priceRaiseawarenessof industrycomplicityAdherenceto Article 5.3FCTC
  • 24. ChallengesPublichealth andDept. ofFinanceobjectivesnot alignedRecessionhappycoincidenceLegalchallengesalwayslooming
  • 25. Contact me:Rachel FoleyPolicy and Public Affairs ManagerIrish Cancer Society00 353 1 231 6634rfoley@irishcancer.ie

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