Financial Resolution No. 2: Tobacco Products Tax

(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 16 October 2013, by substituting the following for Schedule 2 to that Act (as amended by section 49 of the Finance Act 2013 (No. 8 of 2013)):
(With effect as on and from 16 October 2013)

Description of Product

Rate of Tax

Cigarettes .... .... .... ....

Rate of tax at­-

(a) except where paragraph (b) applies, €241.83 per thousand together with an amount equal to 8.72 per cent of the price at which the cigarettes are sold by retail, or

(b) €275.62 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).

Cigars .... .... .... ....

Rate of tax at €279.345 per kilogram.

Fine-cut tobacco for the rolling of cigarettes .... .... .... ....

Rate of tax at €252.222 per kilogram.

Other smoking tobacco .... .... .... ....

Rate of tax at €193.799 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).

This resolution provides for excise duty increases on tobacco products with effect from midnight tonight. The increase amounts to 10 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 minimum duty on cigarettes will also increase.

The price of a pack of 20 cigarettes in the most popular price category will increase to €9.50. The excise duty component of this price will be €5.67, and the total tax, inclusive of VAT, will be €7.44, which represents just more than 78% of the price. The price and tax component of cigarettes in Ireland is among the highest in the EU. The high tax here reflects the long-standing commitment by successive Governments to use taxation as an instrument to discourage smoking. These latest increases will ensure that tobacco tax continues to play an important role in discouraging consumption of tobacco products.

Unfortunately, high prices and taxes also make Ireland an attractive location for tobacco smugglers. The Revenue Commissioners, who have responsibility for tobacco products tax, are very conscious of the threat that this poses to legitimate business and to the Exchequer and will continue to make tackling the trade in illicit tobacco products a key objective. This measure is estimated to yield €2.5 million in 2013 and €15.4 million in a full year.

Unpopular as it might seem to be, I am totally opposed to the measure because of the last point to which the Tánaiste referred, namely, that constantly increasing the price of cigarettes only increases the amount of illegal tobacco sold every week in this country. On the plain packaging proposal, I appreciate very much what the Government is trying to do in its drive to stop additional young people smoking. That is of vital importance. However, I do not agree with constantly raising the price of tobacco as it is making this country a haven for the illegal importation and sale of tobacco products by unscrupulous gangs who make enormous sums of money every week. That is the reason I am against what the Government proposes.

I take a different view to my constituency colleague. We differ on some things. I welcome the proposal and believe there is scope to increase the price further. Any measures that can be taken to discourage tobacco use in society is positive and will pay dividends in the long term. We must make a greater effort to stamp out the trade in illegal, illicit and counterfeit tobacco. I have major concerns about the adverse health impacts of some of the counterfeit products that are freely available in any village, town or city in the country. A serious response is required from the Government. Apart from the impact of regular smoking, we do not know what many counterfeit products contain and in the long term they could have a seriously negative impact on public health.

Ba mhaith liom arís labhairt in aghaidh an ordaithe seo, a bhaineann le tabac. Is fimínteacht ar pháirt an Rialtais ligean orthu gur ar mhaithe le sláinte don chuid is mó atá sé seo á dhéanamh acu. Is ionsaí eacnamaíochta eile é, i ndáiríre, a luífidh isteach orthu siúd a bhfuil thíos leis an dúil atá acu maidir le nicitín. Buille eacnamaíochta eile atá i gceist do ghnáthdhaoine atá sa chruachás seo. I do not take seriously the arguments that have been made in the House for many years about the extra excise duty on tobacco being primarily for health reasons. It is simply another grab for another slice from the pockets of those who are mostly ordinary working class people on middle and low incomes and unemployed people, including those who, unfortunately, are very hard pressed psychologically by the effects of the austerity of the past five years, which does not help them to kick the nicotine habit.

If the Tánaiste were serious about tackling the toxic health effects of nicotine addiction there are a number of roads he could take. I would take the entire tobacco industry into public ownership and strictly control it that way. That hardly would be agreeable to the Labour Party. However, it might at least consider a massive tax on the profits of such companies and devote the extra taxation to address the health effects of nicotine addiction to prevention programmes, breaking addiction for those who are addicted, and to health treatment for the victims of addiction. Those are the areas that must be addressed. A glib measure such as this does nothing. The Government is cutting back on the health service which will affect people who, unfortunately, suffer badly as a result of nicotine at the same time as pretending this is a health measure.

If the Tánaiste were serious about bringing in the extra money to alleviate much of the hardship, a simple 1% in wealth tax on the wealthiest 1% would yield €583 million. If an emergency 5% tax were imposed on them it would yield €2.9 billion in one year. That is only to mention one source of wealth the Labour Party, shamefully, resolutely turned its head against but it hit again the people who can least afford it, including with this measure.

As a smoker, I wish I never smoked but I do and it is not the easiest addiction to kick. It is equally as difficult to deal with smoking addiction as alcohol addiction. I am a member of the Joint Committee on Jobs, Enterprise and Innovation. It is easy to get illegal tobacco in any town or village around the country, my own included. It is a growing part of the economy in this country. Retailers take issue with price increases. We have a number of mobile scanners located at ports that can scan for illicit cigarettes but there are not enough of them.

I note from the information we have received that the money it would cost to have a number of additional port scanners and staff allocated to run them 24 hours per day would be made back overnight by comparison with what it would cost to really clamp down on the illicit tobacco trade in Ireland. Putting 10 cent on tobacco will not stop me or the hard-pressed smoker from smoking. It will be tougher on us, particularly on those who find it difficult to make ends meet. Sometimes smoking is the only relief people have during the week. We have made it a little bit harder by imposing the tax but the reality is that all smokers wish at some stage in their lives that they did not smoke. We really need to invest in mobile scanners, in particular. We need to clamp down on cigarettes whose ingredients we do not even know and which are worse than those we can buy over the counter.

It is an insult to dress up this measure as a behaviour-altering measure. In reality, it is simply revenue generating. If this Government were serious about tackling the tobacco industry, it would start at the top with those companies that poison tobacco users rather than with the victims. Tobacco smoking is an addiction. People need to smoke and unless they get help to come off the drug, they will continue to smoke. The Government's solution is to make them pay more. This will not take anybody off cigarettes.

If the Government were really serious about improving the health service and people's health, it would have considered in the budget the idea of a sugar tax. There are alternatives to using drinks infested with high quantities of sugar. People have a choice in this regard but if one is addicted to cigarettes one must continue smoking unless one gets the required help. If the Government's measures were guided by a desire to improve health, why did it not introduce measures to tackle obesity? That the Government did not introduce such a measure exposes the option before us as an easy one. It is a question of targeting those regarded as a soft touch, or those who must smoke because smoking is an addiction, rather than investing in a means of weaning them off nicotine.

Food addictions create difficulties also, and this might need to be examined.

I cannot understand why the Department is selling itself so short with regard to the shadow economy. I refer to €20 million in respect of illicit cigarettes and fuel laundering. Will the Tánaiste explain why he is selling himself so short in this regard? If we examine the activities of the revenue authorities north of the Border, specifically regarding the identification of fuel-laundering facilities, we will note that in the last full tax year, 2012, they raised approximately €42.5 million more than we did in the South. Surely it would make far more sense if we redeployed some of the staff from the special investigations unit in the Department of Agriculture, Food and the Marine who are surplus to requirements there – there has been a 40% reduction in the budget – to deal with fuel laundering and the illicit trade in cigarettes and alcohol. They have the capability and skill set. The Revenue Commissioners and Customs and Excise staff involved in this type of work have said it is very labour intensive. Surely, by using existing staff in this role, we could dramatically increase the figure from €20 million. This would stop the undermining of Exchequer figures and the leakage of money because of criminal activity across the Border.

We are all aware that the prohibition of alcohol in the United States in the 1930s did not stop the consumption of alcohol but produced the Mafia. Today, the prohibitive pricing of cigarettes will not stop people smoking; it is producing a cigarette Mafia in this country and there is absolutely no question about that. One could probably trace a simple correlation between the rise in cigarette prices in recent years and the growth of the cigarette Mafia. That poses a bigger threat to public health because of the degraded quality of the cigarettes that are smuggled. In many cases, they pose a very direct and immediate threat to people's health.

I am a smoker, I must confess, and I would love to give it up. However, the idea that price will be a serious inhibitor of what is an addiction is nonsense. The Tánaiste knows that. The Taoiseach was honest enough in the debate on alcohol to admit it was about revenue and that a different strategy is required to deal with alcohol abuse and binge drinking, etc. At least the Tánaiste should be honest enough to call this measure what it is, a grab for money.

We should create a culture in which young people do not develop addictions, to alcohol or cigarettes. We need to give people alternatives and generally create a society in which people are not so stressed, anxious and alienated such that they engage in behaviour that is addictive or bad for them. Of course, in budget after budget, the Government and its predecessor have cut and chipped away at the amenities, services and resources that would actually offer people alternatives. The Tánaiste should, at least, be honest: this is about money, nothing else.

I agree this is all about revenue raising.

Tobacco is a drug. The people who get into the illicit drug trade are in the illicit tobacco trade. Cigarettes do not come in with the clouds and rain on the people; they are brought here in shipping containers. Shipowners and shipping agents are the people who should be forced, through really punitive fines and penalties, of €500,000 or €1 million, to police what is shipped in their containers. If spot checks are carried out, the shipping line would get fined heavily. The manufacturers and distributors of cigarettes should be paying social contribution taxes.

As previous speakers have said, there is no doubt that it is difficult to give up cigarettes but it is not impossible. I would like to give encouragement by way of an anecdote. Although I am not iron willed or steel disciplined, I gave up cigarettes on 19 August 1980. One must just decide to do so, and one can do so. My colleagues should not feel despair that they cannot give up cigarettes. Of course, they can. I did it and I am not iron willed.


I am sharing life stories.

Fine Gael did not recognise brilliance in its midst.

It is a bit like a self-help group here.

We will all hold hands next.

I say that as a reformed smoker. We articulated our views last year on foot of the measure to increase the price of tobacco products. The Tánaiste will be aware that we called for an increase in our alternative budget submission. We believe the increase should be in the order of 20 cent. If the Tánaiste read our document, he would have read that money should be ring-fenced to deal with black-market activity. The principle that applies is nearly the same that applied last year. I am nearly rehearsing my contribution of last year. The price of cigarettes can be a deterrent to smokers in some cases. In other cases, it will not be. In some cases, it is just hitting hard in the pocket people with an addiction who cannot give up cigarettes, for whatever reason. International evidence suggests, however, that a price increase can act as a deterrent. However, if we examine the evidence in this State, where the cost of cigarettes has increased quite substantially in recent years, one notes that the percentage of smokers, at 29%, has remained-----

It has started to drop. There may be a decrease and that is to be welcomed.

The various surveys by Retail Ireland and others show that one in every three cigarettes purchased in this State is purchased on the black market or through illicit trade. The surveys show that this costs the Exchequer in the region of €700 million in lost revenue. Statistics show that detections this year are lower than in previous years. I understand there is quite a low figure. We know from documentaries, including "Prime Time", that we do not have the necessary infrastructure to combat very organised tobacco-smuggling criminals, as Deputy Lyons mentioned.

If we decide, as a State, to impose the highest excise duty on cigarettes in Europe we must make sure we have in place our defences and barriers. That is the problem right now - we do not have them in place. That is why in every town and village in Ireland one can buy a pack of cigarettes for €4 or even less. When the margins start to increase, it drives more people into it. The reality is that black market activity in cigarettes has been normalised. There would not be such a high level of black market activity if ordinary, decent Irish people did not think there is nothing wrong with smoking a packet of cigarettes bought on a street corner for €4-----

There would not be such a high level of illegal activity if the paramilitaries cut it out.

-----or from people who go around housing estates, knocking on doors and selling cigarettes.

The Deputy has the zeal of the convert.

People do not see it in terms of defrauding the State, in the context of lost revenue, or even of breaking the law. It is not looked at in that way. There is a job of work to be done if we want to recoup the €750 million that is lost annually through the black market trade but the only way we can do that is to ring-fence the proceeds from increases in excise duty on cigarettes to deal with the problem. Today's budget identifies €20 million for dealing with black market activity over a wide range of areas, including diesel laundering and cigarette smuggling, which is to be welcomed.

Has Deputy Doherty's crowd given up all that now?

The Revenue Commissioners have told the Department that if there is an additional investment in Revenue's human resources, it can identify €100 million of additional revenue. The net effect of that is something like €93 million. An investment of €6 million will bring in €100 million, according to the Revenue Commissioners.

The increase in excise duty is something for which Sinn Féin called, but not if the Government does not direct that revenue to dealing with the fact that one in three cigarettes is bought illegally in this State. The Government must increase the detection infrastructure at our ports. Failing that, the Government should ring fence the additional revenue and use it to deal with health issues. If one goes to Northern Ireland, one can buy nicotine patches very cheaply in places like Asda but in the Republic, they actually cost quite a lot. They are available on medical cards, which is to be welcomed, but for those without medical cards, they are quite expensive. We need to provide incentives for people to give up cigarettes and to assist them in their efforts.

I do not believe the Government has introduced this measure because of a desire to reduce the future health bills of the State or to target black market activity but simply as a snatch and grab exercise to increase the revenue of the State and to fill the hole that exists.

I welcome this measure, the announcement of which ties in with the Minister for Health's drive to achieve a tobacco-free Ireland by 2025. Those who are making their comments should be aware that a report published by the Minister for Health contained 66 recommendations in this regard. I compliment Deputy Micheál Martin for the approach he took on tobacco. It is time for a unified approach to take us from the smoking ban to a tobacco-free Ireland. I am disappointed by the cynical remarks of Deputy Mathews because price is an inhibitor. Price plays a role in tobacco consumption. As Deputy Doherty has said, we need a concerted effort to tackle tobacco consumption through education as well as dealing with smuggling and the illicit trade in cigarettes. We also need to examine the issue of plain packaging and how we can educate our young people.

Those who were opposed to the smoking ban should reflect on where we are today and the benefits that have accrued in the workplace. They should also consider the benefits to public health generally. This resolution must be viewed as a public health measure and I challenge those opposite to declare whether they are opposed to public health measures. Are they against the aim of driving people away from tobacco and smoking? Do they believe the tobacco industry is our friend? That industry employed almost 200 lobbyists last week to put pressure on members of the European Parliament in the context of tobacco controls. Let us be clear about the fact that 5,200 people die in this country every year from tobacco-related diseases. Is that to be our legacy on public health? This measure is a positive one which should be supported.

The taxpayers of this country pay all of us who come into this House sizeable salaries. In addition to that, the taxpayers of this country also provide resources for Deputies in the form of parliamentary assistants, personal assistants and so forth. Frankly, I believe it is unacceptable to taxpayers in this country that Deputies Daly, Higgins, Boyd Barrett and Mathews would come in here and make such ill-informed contributions as they just have on this item.

They were not ill-informed contributions.

The Deputies should at least come in here on an informed basis.

Let us deal with the facts now. First, on tobacco consumption, the proportion of the population that is smoking has fallen. According to the National Tobacco Control Office, 21.7% of the population is currently smoking, compared to 27% in 2003 and 31% in 1998. There are several factors contributing to the decline in the consumption of tobacco, one of which is the measure introduced by Deputy Martin when he was Minister for Health. Price is also a factor and the excise duties placed on tobacco products have contributed to the aforementioned decline in consumption. Since 2003, the total consumption of tobacco declined by 45%. However, when one looks more closely at the statistics on consumption between 2003 and 2013, one will see that in four of those ten years, there was no increase in excise duty on tobacco. There was a decline in consumption in every year that excise duty was increased but in two of the four years when excise duty remained unchanged, there was an increase in consumption. In 2005, for example, excise duty was not increased and consumption increased by 3.4%. In 2006, excise duty was unchanged and again, there was an increase in consumption of the order of 1.6%. Last year, with an increase in excise duty of 25 cent, there was a decline in consumption of almost 9%.

The Tánaiste has no idea of the amount of illegal tobacco being consumed here.

There is a direct correlation there.

On the question of illegal consumption, the Revenue Commissioners estimate that the total consumption of non-duty cigarettes in the State is 19%. Of that, 6% is made up of cigarettes purchased legally in other States, that is, cartons that people buy on their holidays abroad and bring home with them. The other 13% is due to smuggling. A number of measures are being taken to address the smuggling problem. The Revenue Commissioners, for example, have added a van scanner to their detection equipment. Revenue had a number of scanners for detecting large containers of cigarettes coming into the State and in response to that, some smugglers broke up their consignments into smaller units. The new van scanner is capable of scanning for the much lower quantities involved.

I am aware that I am out of time but am grateful for the opportunity to put those facts before the House.

The time has expired so I must now put the question, "That Financial Resolution No.2 be agreed to". Is that agreed?

Question put and declared carried.