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Increasing taxation doesn't encourage smokers to quit

Mon 14th November, 2011

Landmark research suggests that so-called "sin taxes" do not encourage people to give up. 

Academics found the number of smokers in Eastern Europe did not fall when 10 states joined the EU in 2004 – even though the price of cigarettes soared by as much as 100 per cent ahead of wages when they became subject to Brussels rules on minimum tax levels.

On average, the affordability of cigarettes, measured by minutes of work needed to buy a pack of 20, fell by 40 per cent. But there was no fall in smoking prevalance – and in several countries, the number of smokers actually rose, to the bafflement of researchers.

Adam Spielman, a tobacco analyst at Citigroup, said the results contradict the "absolute orthodoxy" of public health policy – that tax increases cut smoking.

"It is widely assumed for every 10 per cent increase in the price of cigarettes, the volume of smoking will go down four per cent and therefore if the government wants to reduce smoking, one way is to increase tax," he said. "It's a surprising result."

The tobacco industry says the research shows successive tobacco duty hikes are unjustified and has demanded that Chancellor George Osborne freeze cigarette duty in this month's Autumn Statement.

A spokesman for the Tobacco Manufacturers' Association said: "This study clearly demonstrates that taxation is a largely ineffective tool for reducing consumption. We very much hope that, in his Autumn Statement, the Chancellor will take the opportunity to combat tobacco smuggling in a meaningful way and resist the temptation to raise duty."

It is estimated a quarter of cigarettes smoked in Britain are now smuggled, costing the exchequer £3bn a year.

Source: Sunday Telegraph (13 November 2011)

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