Dáil Éireann díospóireacht -
Wednesday, 25 Jan 1989

Vol. 386 No. 1

Financial Resolution No. 1: Excise — Beer. - Financial Resolution No. 5: Tobacco Products.

The Taoiseach

I move:

(1) That in this Resolution—

"the Act of 1977" means the Finance (Excise Duty on Tobacco Products) Act, 1977 (No. 32 of 1977);

"the Act of 1988" means the Finance Act, 1988 (No. 12 of 1988);

"cigarettes", "cigars", "sweetened pipe tobacco", "hard pressed tobacco", "other pipe tobacco", "smoking tobacco", "chewing tobacco" and "tobacco products" have the same meanings as they have in the Act of 1977, as amended by the Imposition of Duties (No. 243) (Excise Duty on Tobacco Products) Order, 1979 (S.I. No. 296 of 1979), and by section 55 of the Act of 1988.

(2) That the duty of excise on tobacco products imposed by section 2 of the Act of 1977 shall, in lieu of the several rates specified in the Fourth Schedule to the Act of 1988, be charged, levied and paid, as on and from the 26th day of January, 1989, at the several rates specified in the Schedule to this Resolution.

(3) 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).

SCHEDULE

Rates of Excise Duty on Tobacco Products

Description of Product	Rate of Duty
Cigarettes	£40.70 per thousand together with an amount equal to 13.56 per cent. of the price at which the cigarettes are sold by retail
Cigars	£60.217 per kilogram
Sweetened pipe tobacco	£60.851 per kilogram
Hard pressed tobacco	£38.914 per kilogram
Other pipe tobacco	£48.916 per kilogram
Other smoking or chewing tobacco	£50.814 per kilogram

This is to give effect to an excise duty increase of 4p, including VAT, on a packet of 20 cigarettes in the most popular price category and to provide for pro rata increases in the case of other tobacco products. The duty will provide £9 million to the Exchequer in 1989 and £10.4 million in a full year. The effect on the CPI is 0.8 per cent. I have already given the figures for the effect on consumption.

Mr. Dukes

Bearing in mind the fact that after this intervention I will be relying on your indulgence for anything else, I must be quite careful not to leave a question unasked. I note — and understand the reason — that the Taoiseach has not given any particular motivation for this increase.

An Ceann Comhairle

I am sorry to interrupt Deputy Dukes but the conversation in the lobby is interfering with the debate in the Chamber. It constitutes disorder and must cease.

Mr. Dukes

I imagine that some of the Deputies who are leaving will now have a smoke. I am not sure when the proposed increases come into effect, I imagine it is at midnight. I note that the effect of this increase in duty is to produce £9 million for the Exchequer this year — not a large amount of money — and just over £10 million in a full year. The Government have taken the course of having a number of different little ways of raising revenue and, in doing that, they have shown they are not inclined to go for any real reordering or reform of the tax system.

How far will this increase bring the Irish excise duty on cigarettes and tobacco products away from the kind of targets that are involved in indirect tax harmonisation in the European Community? The other increases which we talked about on beer, spirits, wine, cider and perry and so on, while small enough in themselves, also bring us further away from the kind of target levels we are looking at for harmonisation in the European Community. I hope you will allow me to refer occasionally to other excisable products because the point applies to them all. As we go along with this type of activity we are getting further from the point at which will be aiming when we seriously start to harmonise indirect tax rates in the Community.

I know that the Taoiseach and the Government have a short-term interest in covering a gap in revenue during the course of this year but they are not looking at the longer term implications. The references which the Minister for Finance made in the course of his financial statement this afternoon to tax harmonisation in the Community were a good deal less than complete and did not give anything like a full picture of what is facing us. He said — if I remember correctly — that there had been no negotiations or discussions about how the Community will go about this kind of tax harmonisation. That may well be true and, if so, there should be at least one voice, in addition to that of the Commission, that would seek to start these discussions.

An Ceann Comhairle

The Deputy will agree that he is straying very far from the resolution before us.

Mr. Dukes

I am referring to the fact that the increase in excise duties on tobacco products proposed in the resolution before us brings the level of Irish excise duties on tobacco products further away from the level we will have to aim at when we have tax harmonisation in the European Community.

An Ceann Comhairle

Tax harmonisation is a matter for another day.

Mr. Dukes

It is directly germane to the increase. If we were not talking about an increase in the duty I would not be worried about straying from the European target level. If I cannot talk about indirect tax harmonisation in the course of a debate on a specific proposal to increase it, I do not know when I can.

An Ceann Comhairle

There will be ample opportunity to do so and the Deputy knows that full well.

Mr. Dukes

Upon my soul, it seems to be unduly restrictive on your part not to allow me to talk about levels of indirect taxes when we are debating a proposal to increase one. I find that difficult to take.

An Ceann Comhairle

We are dealing with Financial Resolution No. 5, excise duty on tobacco products.

Mr. Dukes

I am talking about excise duties on tobacco products, perhaps in a wider context——

An Ceann Comhairle

The Deputy is straying into European taxation.

Mr. Dukes

One day — maybe not in 1992 or 1993 — we will come to a point where excise duties on all these products in the European Community will be more or less harmonised. I might even be still smoking at that stage.

Mr. Wilson

There will be no smoking then.

Mr. Dukes

We will see. The Minister said this afternoon that there were difficulties in the process of tax harmonisation and that is certainly the case but we will get there eventually. We should not be making it more difficult for ourselves by going along with this kind of increase. Sooner or later, the Commission will propose — and the Council of Ministers will agree — some form of a preliminary standstill agreement which will require member states not to get any further away from the harmonised position. What moves are now being made in that connection?

I can quite understand that a Commission which has been in office for only a couple of weeks will not have made any moves in this regard and will not even have developed its own doctrine as to how it will go about it, but we saw all through last year — and indeed since 1985 when the proposal was first made by the Commission — a fair deal of work by working parties and at various other official levels on the question of tax harmonisation. In the context of the increase now proposed, at what stage is that work in the Community? What does the Taoiseach believe the course of the discussion will be and when can we expect decisions to take shape?

In that same context, will the Taoiseach give a rough indication of the target level of excise duty on cigarettes and tobacco products if we were to implement the kind of general proposals the Commission has made so far and how it compares with the excise duties we now have?

The Taoiseach

The simple answer is that the tax harmonisation changes in the Community will be of no significance. As the Deputy knows, all we are doing here is keeping our excise duties in line with the rate of inflation and the effect, from the point of view of harmonisation, will be marginal. There is an aspect to which I should like to draw the Deputy's attention, the EC Commission admitted that in framing its proposals, it had confined its objections to meeting purely fiscal considerations and that there is a case to be made because of general concern about the health consequences of smoking and drinking for "aiming towards generally high rates of taxation on alcoholic drinks and tobacco products". The Commission would seem to be a little ambivalent about the level at which harmonisation on drink and tobacco should take place. In any event, what we are doing here will have a very marginal effect and will have a very marginal impact. In so far as it could be looked at from the point of view of ultimate harmonisation, it is not really a significant factor. I think that was the principal point made by the Deputy.

Mr. Howlin

In relation to Resolution No. 5, there are few dutiable items which have such obvious potential for harm as tobacco products. We spent some considerable time in the last session of this House debating the Tobacco Bill. A raft of evidence was produced during the course of that debate from all sides of the House on how damaging the various manifestations of tobacco can be to the health of the individual and not only that but the cost factor for the public health system of the consumption of tobacco in all its various forms. For these reasons the Labour Party consider that the increase proposed in this resolution is a modest one and, as the Taoiseach has indicated, it is barely in line with inflation. We support the notion that there should be a reasonably high level of duty on a product such as this, which is in the luxury bracket and which should be regarded as something that can pose a potential threat to the population and, therefore, should have a high duty. The price factor is obviously a crucial one in determining the level of consumption. We will have no difficulty in allowing this level of duty to go unopposed.

I would like to say, a Leas-Cheann Comhairle, that the Labour Party oppose the entire thrust of the budget delivered to this House this evening, regarding it as grossly inadequate to address the grave problems of unemployment and poverty that beset this country. We will reserve that opposition for the real issues and we will not try to frustrate the efforts of the Government to level duties on a few items, such as tobacco, which pose a threat to the population as a whole and, indeed, have a very serious cost factor for the public health service in treating the casualties of tobacco consumption.

Proinsias De Rossa

In relation to this particular resolution we have no objections. I am sure the Taoiseach, Deputy Haughey, will be pleased to know that as he became upset at our opposition to Resolution No. 1, when he asked whether there could ever be a budget which would be brought in by himself or his party which we would support. The likelihood of the Fianna Fáil Party ever introducing a budget which we could support is very slight; I would not even put a figure on it. Nevertheless, this resolution is one which we have no problem in supporting as we have, in fact, supported individual items which that Government have introduced in the past. I am sure there will be occasional items in the future which he will introduce which we can support. In relation to the general question of the budget, we simply do not support it and that is the reason we voted against the first resolution tonight.

The Taoiseach

That is probably the best confirmation we could get that we are on the right track.

Proinsias De Rossa

Obviously, the Taoiseach feels he is on the right track because this is the direction in which he is going and it is the direction in which he has moved in order to win the support of the Fine Gael Party and the Progressive Democrats. I suppose I could say equally that the fact that those two parties are supporting him is the best indication I could have that we are on the right track.

Mr. Spring

It is so different to 1982.

Mr. Noonan

(Limerick East): A Leas-Cheann Comhairle, keep me on narrow tracks.

An Leas-Cheann Comhairle

Not necessarily for defending tobacco products but for discussion purposes.

Mr. Noonan

(Limerick East): I think 4p on the package of cigarettes was expected and it is only logical to have the consequentials on other tobacco products. I noticed in the returns for 1988 that there was an increase in excise duty on tobacco of £13 million. That would suggest there is a buoyancy in the cigarette smoking business in excess of the buoyancy elsewhere in the economy. With emigration levels of 30,000, 35,000 or 40,000 over the last three or four years, with that large number of young people gone out of the country, it seems that a significant extra number of people are smoking and they are smoking more. It looks now as if the trend towards fewer people smoking less has stopped and that the graph of cigarette smoking has gone up again. Our own observation would confirm that. It seems that somking among young women is widespread. If we are to talk about the connection between cigarette smoking and health, there are even greater health concerns when we think of the effect of cigarette smoking on young pregnant women. The industry can take the 4 per cent imposition. It is in line with inflation and I have no objection to this imposition.

On the other hand if we match it against the very small increases given in social welfare, it is interesting to do some sums on it. The main increase given today was 3 per cent across all the rates even though the Minister seemed to emphasise a 12 per cent increase which is restricted to single persons who are long term unemployed. For somebody on unemployment benefit of £45, the increase of 3 per cent on that is £1.35. If that man or woman is smoking 20 cigarettes a day, 28p of the increase is gone immediately. If we were very righteous we could say the unemployed and those on social welfare should not smoke or drink, that it is bad for their health but what other comfort have they? It is a fact of life that people with time on their hands smoke more than people who do not have as much time on their hands and they are certainly inclined to drink more.

The pint is going up a penny. Depending on what part of the country you are in, it is a penny on top of 8p or 9p as the trade got 2p, the manufacturers got 2p before Christmas and the vintners took 5p last week. For the man on social welfare — and you could make a great argument that he should never have a pint — if he was to have ten pints in the week, and that would not be heavy drinking for anybody, you are talking about 80p or 90p. Regarding the impositions on drink and tobacco alone, the social welfare benefits are gone. I know social welfare benefits can be made to look very large because there are many poor in the country and when small benefits are accumulated it results in £70 million. It can then be claimed that you are doing a lot for the poor. What it really shows is that there are many poor people, that you are doing very little for all of them but it runs into huge numbers. That is the only comment I have to make.

It is interesting to look at the excise increases and other increases in the budget and see the clawback elements, the clawback element on the income tax side to give the benefits, that child benefit will be means tested next year and that public servants will be paying full PRSI. These are swings and roundabouts. I know somebody is getting upset because I am wandering from the point, so I am going to sit down. We are not opposing the 4p on the cigarettes.

The Taoiseach

I have just one point with regard to consumption. The underlying reality is that whereas the amount of duty may be increasing, actual physical consumption is going down.

Mr. Howlin

It is increasing among women.

The Taoiseach

I can only give the overall figure. I want to take up the point made by the Deputy. The fact that the amount of duty taken by the State is increasing does not mean that consumption is going up, in fact it is going down. I must acknowledge that the rate of decrease in the physical consumption was smaller in 1988 than it has been for many years. Over the years there has been a steady decline, since 1982, in the actual amount of tobacco consumed, but between 1987 and 1988 that fall was much less significant than it had been in previous years.

Like everybody else, my friends tell me that young women are smoking much more these days. If that is so, it is very regrettable because this is an areas where women are possibly more vulnerable than men. It is a pity that in spite of all our efforts there should be any increase in consumption in any sector of the community. This is something we should all try to do something about. On the other hand, simply increasing the cost of cigarettes does not always have a beneficial effect on consumption. It just means people sacrifice something else in order to be able to smoke. However, I do not think the 4p we are putting on here will have any great effect one way or another on consumption. In any event I appreciate that the House is prepared to let this resolution go without any division.

Question put and agreed to.