Dáil Éireann díospóireacht -
Tuesday, 13 Oct 2015

Vol. 892 No. 4

Financial Resolution No. 3: Tobacco Products Tax

The Taoiseach

I move:

(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 14 October 2015, by substituting the following for Schedule 2 to that Act (as amended by section 60 of the Finance Act 2014 (No. 37 of 2014)):

"SCHEDULE 2

RATES OF TOBACCO PRODUCTS TAX

(With effect as on and from 14 October 2015)

Description of Product	Rate of Tax
Cigarettes	Rate of tax at­- (a) except where paragraph (b) applies, €271.96 per thousand together with an amount equal to 9.20 per cent of the price at which the cigarettes are sold by retail, or (b) €307.61 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 €315.359 per kilogram.
Fine-cut tobacco for the rolling of cigarettes	Rate of tax at €291.683 per kilogram.
Other smoking tobacco	Rate of tax at €218.783 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).

Financial Resolution No. 3 provides for excise duty increases on tobacco products with effect from midnight tonight. The increase amounts to 50 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 price of a pack of 20 cigarettes is the most popular price category. Assuming the increase is passed through, the final retail price will increase to €10.50. The excise duty component of this price will be €6.41 and the total tax inclusive of VAT will be €8.37, which represents almost 80% of the price of a pack.

The price and the tax component of cigarettes in Ireland are among the highest in the EU. The high rates of tax prevailing here reflect the long-standing commitment by successive Governments to use tobacco taxation as an instrument to discourage smoking, particularly among younger people. We are making progress on this front. In 2011, 24% of people were daily smokers. The Health Ireland survey carried out this year for the Department of Health indicates that 19% of people are daily smokers now. The figure is still too high and the increase in excise duties announced this afternoon will ensure tobacco taxation continues to play an important role in discouraging the consumption of tobacco products. In the overall context of the budgetary measures introduced this year, there is still a need to raise revenue for the Exchequer. To that end, the increase in excise duty on tobacco products will contribute €8 million to the Exchequer in 2015 and €61.4 million in a full year.

Deputy Caoimhghín Ó Caoláin

Not for the first time have I made these points on the floor of this House. I believe that in the absence of complementary measures to tackle the illegal tobacco trade, this measure becomes simply a revenue generating measure and that while it might dissuade some from taking up smoking or continuing their habit, it will undoubtedly drive more into the hands of the criminal gangs engaged in the smuggling and sale of contraband and illegal imported tobacco products.

This measure should be a consideration primarily on health grounds. The serious cost that tobacco smoking exacts from our already stretched budget annually tells us that this is not just a revenue gained or revenue lost issue. The real cost is seen in the day-to-day efforts of health service providers as they battle to address the human ravages of tobacco smoking. Other issues include the suffering of the user and their family and loved ones and so often their grief.

We put forward a proposal for a 20 cent increase in our alternative budget proposals. We are committed to using every measure to dissuade people from continuing with the smoking habit or, God forbid, even taking it up. This is where we need to concentrate. We need to dissuade people, especially young people, from starting to smoke. It is essential that we balance that commitment by tackling the illegal tobacco trade in this country head on. I mean that in the strongest possible terms. It is essential we do not find ourselves putting 50 cent on a pack of 20 cigarettes and driving countless smokers into the hands of greedy criminals operating in and peddling their wares across Dublin city and other urban centres throughout the State.

It is inadequate as it stands. While the 50 cent increase may dissuade some because it might be particularly staggering, and I hope it is, as a measure designed to achieve what I believe we are all committed to achieving, it is fundamentally flawed because it is not the full package, no pun intended. It is essential that measures are introduced to tackle the illegal tobacco industry in all its guises and with the understanding that some of the world's largest legitimate tobacco manufacturers might be involved in that trade. There is ample evidence to suggest that this is the case and at the end of the day, they will sell their wares either through retail outlets or on the streets of our capital city and will be at no loss. That is not good enough.

Deputy Brendan Smith

I support the measure. I refer in particular to the scourge of smuggling that existed with illicit products. Over the years, we have heard substantial coverage of the problems associated with the illegal trading of diesel along the Border and, in more recent times, stretched petrol. Some months ago, as the Tánaiste knows, I introduced legislation before this House that sought to amend the Protection of the Environment Act 2003. The purpose of that Bill was to propose the establishment of a cross-Border statutory agency to investigate and report on fuel smuggling and other criminal activity. I had the smuggling of other illicit products in mind as well, including cigarettes. What I had in mind at the time and what was included in the Fianna Fáil Bill was a forum that was representative of members of An Garda Síochána, the PSNI, the Revenue Commissioners and their counterparts north of the Border, the Environmental Protection Agency and the Department of the Environment, Community and Local Government. The relevant agencies would be involved in a forum that would deal comprehensively with the problems of smuggling and associated criminal activity. We are all aware of this activity that, unfortunately, exists in parts of our island. As a representative of two southern Border counties, I am especially conscious of the criminal activity involved, particularly in fuel smuggling and other illicit trade. We are well aware of the huge volumes of laundered diesel that have been a plague on-----

An Ceann Comhairle

We are dealing with cigarettes here.

Deputy Brendan Smith

Unfortunately, the illicit trade in tobacco goes along with that. We need a forum that will deal comprehensively with these smuggling problems. This activity deprives the State of much-needed revenue. I compliment the Revenue Commissioners and their officials on the ground who work in very difficult circumstances and who do a good job in tackling these issues, but they need more resources and a new statutory agency to co-ordinate their work.

Deputy Billy Kelleher

We will not be opposing this particular Financial Resolution. Any measure that discourages people from taking up smoking or that encourages them to give it up is welcome, but I do not think it can be taken in isolation nor can we continually raise the price without ensuring we have proper support services for people who are addicted to nicotine. At the outset, we must understand that this is an addictive substance. Most smokers would rather not smoke and would prefer it if they could give up. We need an integrated plan across our health services and community settings and among our GPs to facilitate people who want to give up. While we increase the price of tobacco and cigarettes, we need a robust assistance scheme to allow people to give up cigarettes with replacement therapy and other therapies that assist people with this addiction. It is primarily an addictive substance.

When we look at what happens with the illicit trade, we need to accept that we have a huge problem with the smuggling of tobacco. The more we increase the price through Financial Resolutions in this House, the more we incentivise smuggling and make it more profitable for those involved in the illicit trade. There is a huge cost to the State in terms of lost revenue, but more important, when we look at this from a health perspective, we are not encouraging people by making legal cigarettes dearer and the criminal element comes in with illicit tobacco products.

Hand in hand, we need a robust system to deal with this illicit trade. Retail Ireland has reckoned that it could cost the State up to €1 billion in lost revenue. That is a huge sum of money. We do not have a robust system in place through Customs and Excise, An Garda Síochána and other agencies charged with the responsibility of tackling this scourge in society. Day in day out on the streets we can see the illicit trade operating in the open. We support the measure, and anything that discourages smoking is welcome, but we must have a robust system for tackling the illicit trade and a humane system to encourage and allow people give up cigarettes through various therapies and supports provided by the HSE.

Deputy Denis Naughten

I welcome this measure but it is important that the funding is ring-fenced. Earlier today the Minister for Finance said the funding will go to the provision of child care supports. I welcome the investment being put into that area. As I have said before, however, reform of child benefit could be used for that purpose. I would like to see the money generated by tobacco sales used for long-term prevention within the health sector. We always look at the health service from the point of view of fire brigade action rather than considering steps we can take today that can have a long-term impact on the health of the nation. Increasing the price of cigarettes will have an impact because we hope it will have a deterrent effect on those who already smoke and on those who would take up smoking.

The money generated from this and specifically from the 50 cent increase should be ring-fenced for new preventative measures within the health sector. For example, there is a national car test, NCT, but we do not have a national health test for people. Why not introduce that once every four years, whereby everyone would have a free comprehensive health check that would identify diabetes, chronic obstructive pulmonary disease, COPD, and deal with them at a far earlier stage, which would save the health service an absolute fortune in the long term? That makes far more sense.

It is estimated that approximately €1 billion is being lost through the illicit trade in this country. That €1 billion would fund approximately 1 million additional medical cards across this State, which would have a major impact on improving health standards. Surely it makes sense to try to clamp down on the illicit trade.

Deputy Richard Boyd Barrett

I disagree with this. Of course we should encourage people to give up smoking. It is a bad and dangerous habit. I can say that as a smoker.

Deputy Joan Burton

Can we persuade the Deputy?

Deputy Richard Boyd Barrett

It is not good. My children are always trying to persuade me and we should encourage as many people to give up a very bad and dangerous habit as possible but for those on low incomes, who are already struggling and who happen to have this habit and addiction, this is just another tax on their income. A pensioner who has got a miserly €3 a week back in this budget will have that wiped out by this measure. That person will be down 50 cent a week. An unemployed person, a jobseeker, a lone parent or a carer, none of whom has seen any increase in their basic rate in this budget, will be down another €3. It is particularly a tax on the poor. It does not matter if a person is wealthy or well paid. It will make no difference to or impact one way or another on the predilection to smoke, and it will not for most people, but it will have an impact on their income. As we have in previous years, we will oppose this tax. This is a revenue-generating exercise, nothing else, and it always has been. In every budget in which it is put forward, there are plenty of places where the Government does not hit the well-off but where it could generate revenue through the corporate sector, financial transactions, the wealthy, and higher incomes. This is just another tax on the least well-off and I will oppose it for that reason.

Deputy Joe Higgins

It is 18 years since I first stood up in this Chamber on budget day to oppose this bit of annual hypocrisy by the parties in power, bringing in a punitive tax which particularly impacts on poor people under the guise of health. I am obliged to Dan Macguill at the TheJournal.ie for some research on this, especially as I was taken up with the terrible issues of homelessness and other baneful effects of austerity in the immediate past.

Of course nicotine is a dangerous and destructive drug, not to mention the dozens of other chemicals included in cigarettes, and the cancer and heart disease to which they hugely contribute are horrific ills in society. I absolutely oppose the ruthless cigarette manufacturers.

Deputy Jerry Buttimer

No, the Deputy does not.

Deputy Joe Higgins

They should be nationalised. They should be a State monopoly.

Deputy Jerry Buttimer

How can they be nationalised?

Deputy Joe Higgins

Cigarette sales should be regulated and any excess should go into harm reduction and to major programmes to assist people in ending addiction. Prohibitionism on alcohol or tobacco does not work so how can we assist people in not smoking or drinking to excess? Jacking up prices is put across as an effective measure. That is now being challenged quite strongly. It is true that a graph in Euromonitor International shows that between 2004 and 2014 as the price went up, consumption went down, but it also showed that over that period the amount of untaxed cigarettes sold, those from the black market, rocketed. In fact, people are turning to untaxed cigarettes and probably even more unhealthy cigarettes.

In a 2013 budget debate, the Minister for Finance, Deputy Noonan, said:

Many issues arise with regard to the tobacco and cigarette business... I am not sure about the statistic that every €1 increase in the price of a packet of cigarettes reduces smoking. It is possible that what appears to be a reduction in consumption is simply a transfer of consumption to smuggled cigarettes.

The Revenue Commissioners made exactly the same point in a report in 2011. Nevertheless, we are here again under the guise of saying with certainty that this increase will reduce consumption, which is not the case.

I oppose this rise. It is a tax on poor people among whom cigarette smoking is unfortunately more prevalent, and it is regressive. We should have major investment in alternative ways of helping people to quit addiction.

Deputy Jerry Buttimer

I am disappointed by the tenor of the remarks of some of the Members opposite. They should read the Irish Heart Foundation’s pre-budget submission which speaks of lower income and price control measures. A total of 5,200 people in our country will die from tobacco smoke, which costs our State €1 billion. I challenge the Members opposite to read not just the Irish Heart Foundation’s submission, but also one from the Canadian Cancer Society where Robert Cunningham, a policy analyst, says price and affordability are the biggest influences and factors.

To refer to Deputy Higgins’ point, those at the lower level of income are the least likely to take it up, in particular young people. We all recognise that the tobacco industry is targeting young people because it needs new people to come in to the market every day. Let us be honest: this is not a question of raising income. We have a duty of care as health policy advocates to promote the achievement of a tobacco-free Ireland by 2025.

That is what we must try to do. It requires a compendium of approaches. As Chairman of the Joint Committee on Health and Children, I would like to see some of the money being ring-fenced for cessation programmes and for retail. Deputy Ó Caoláin and I sat on the committee, which this year dealt with legislation around plain packaging We must look at ways to support retailers to get alternative sources of income.

Deputy Joe O'Reilly

I share the view of Deputy Buttimer that there is a real link between the price of cigarettes and consumption. There are other extraneous factors at play such as health education and peer group habits, all of which impact, but price is at the centre. This is known from anecdotal evidence but also empirically from the kind of evidence cited by Deputy Buttimer and by the Taoiseach who, when moving the resolution, pointed to the drop in smokers in recent years from 24% of the population to 19%. He also spoke of the targeting of young people by cigarette companies.

Nobody should underestimate or should fail to restate the enormous suffering associated with the effects of smoking for individuals and families. It does not need chronicling now but none of us is unaware of it. We have all experienced it within our own families at some time or another. I take the point made by my two constituency colleagues that the illegal tobacco trade has to be tackled and extra resources are going into the Department of Justice and Equality for that purpose. It is important that extra gardaí are used to target the illegal tobacco trade and illicit smuggling trade.

There is merit in what Deputies Boyd Barrett and Higgins said about there being a number of poor people in a poverty trap because of addiction. For that reason it is great that patches are now available through the medical card. There should be a concentration on programmes to help stop smoking. I would like the Tánaiste to respond to this point.

An Ceann Comhairle

She will not get the chance unless the Deputy finishes. There are only seven minutes left and two other speakers have to speak before the Tánaiste.

Deputy Joe O'Reilly

We need to help people who are addicted and in a poverty trap and we need nurses and GPs at the coalface for that purpose.

Deputy John Halligan

I will support this measure but smoking is an addiction, which is always very difficult to deal with. I agree with my colleagues, who are on my right but on the Left, that price increases certainly affect those on low income or no income at all. It does not affect those who are addicted to cigarettes and can afford to buy them and it has been shown, time and again, that if a person is addicted to a substance then irrespective of how much the price increases he or she will buy them anyway, as with drugs. I find it difficult not to support the measure, though.

There has always been a perception that this is a tax-collecting mechanism because we do not ring-fence the money. We should show people that the extra money collected is ring-fenced into the part of the health system that deals with people addicted to cigarettes. People would then be more inclined to support the measure, even those who are addicted to cigarettes.

Deputy Finian McGrath

I strongly oppose the measure to raise the tax on tobacco. Smokers, some 20% of the population, are a soft target and they are being hammered. There are no arguments with the health issue but the economic arguments have to be looked at. Colleagues spoke about lost revenue of up to €1 billion through smuggling and small retailers are telling us they are suffering very badly. Smuggling and gangland crime are even more serious issues and many drug dealers are moving into illegal cigarettes. They are getting away from drugs but making major money.

We need a strong health education programme. Addiction is a problem in this country - I am one of the smokers and I accept that. However, when one sees people on wheelchairs being wheeled out of hospital to the edge of the hospital grounds to have a smoke, or mental health patients getting very stressed over the fact that they cannot have a cigarette, then we have to look at what is happening in society.

I strongly oppose this measure because it is picking on an easy target. It is claimed it will raise €61 million but in reality it is losing up to €1 billion.

Minister for Social Protection (Deputy Joan Burton)

We have had this debate on cigarettes on many occasions in the House. I have been at odds on many occasions with Deputy Finian McGrath but I favour measures to cut down smoking to the maximum level possible as a society. Anybody who visits hospices and sees the suffering, the pain and the difficulties people go through would certainly see that smoking causes extraordinarily difficult health problems for people, ranging from treatable issues like emphysema to more serious issues such as lung cancer. I agree with those Deputies who said we should make every effort to bring this to an end. I also agree with Deputies who suggested we should be much tougher in our efforts to bring an end to cigarette smuggling. Quite a lot of work is being done in that area, including a number of cross-Border and international initiatives to use big data and intelligence operations to make the campaign against smuggling more effective.

Deputies Smith and Ó Caoláin proposed that the spend on deterrent measures be commensurate with the amount raised but such is the cost of smoking in the health service that we would need to raise a great deal more than we are raising with this measure. It indicates a great determination of many Members of the House to encourage as many people as possible to abstain from smoking throughout their lives. Many people enjoy cigarettes and probably control their consumption but the overall impact on public health is pretty devastating. The biggest risk is when young teenage children get involved in smoking and, by the time they are 21, it is extraordinarily difficult for them to give it up. Some succeed but a lot do not.

Deputy Boyd Barrett mentioned lone parents and I mentioned lone parents in the budget. I do not know if the Deputy has had the chance to study it yet but a lone parent with two children will get a Christmas bonus of €185.70, while a lone parent with two children will get an extra €120 per year in child benefit and a lone parent with two children will get a fuel allowance of €2.50 per week.

I am therefore very happy to say that in this budget lone parents-----

Deputy Richard Boyd Barrett

There is no change to the core payment.

Deputy Joan Burton

On those ones alone it comes to €270, which is more than €5 a week. The Deputy is clearly locked in here in the Leinster House bubble and has not seen that there are significant improvements. We have not made all the improvements that we would like. That is on the increases in payments alone.

Deputy Richard Boyd Barrett

There is no change to the basic payment.

Deputy Joan Burton

In addition, for people who are on FIS there is an increase of €5 for the first child and €10 for the subsequent children. We also have the disregard for the jobseeker's transitional arrangements. So there are very specific measures. I would certainly hope that as little as possible of the increase in payments to lone parents or anyone else on social welfare would be spent on cigarettes and tobacco. People are free to spend their money in whatever way they wish. I acknowledge the Deputy's stance on cigarettes over many years. From a public health point of view, and for the sake of children in a household where there is smoking and who are exposed to passive smoke, I concur with the Deputies who said that as a society and as a Parliament we should do all we can to deter people from smoking. Pricing is a deterrent.

There is a problem with smuggling.

Deputy Joe Higgins

There is no research-----

Deputy Richard Boyd Barrett

There is.

Deputy Joe Higgins

-----on the transfer to smuggled cigarettes.

An Ceann Comhairle

Sorry, we are over time.

Deputy Joan Burton

Pricing is a deterrent and the more people we can deter from smoking, the better for everyone involved.

Deputy Finian McGrath

On a point of order-----

Deputy Joe Higgins

We need to have research to see what Revenue says. The Government's own Revenue organisation said it.

An Ceann Comhairle

As the time allowed for the debate has expired, I must now put the question.

Question put: "That Financial Resolution No. 3 be agreed to."

The Dáil divided: Tá, 112; Níl, 22.

Tá

• Bannon, James.
• Barry, Tom.
• Breen, Pat.
• Bruton, Richard.
• Burton, Joan.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Byrne, Eric.
• Calleary, Dara.
• Cannon, Ciarán.
• Carey, Joe.
• Coffey, Paudie.
• Collins, Áine.
• Collins, Niall.
• Conaghan, Michael.
• Conlan, Seán.
• Connaughton, Paul J.
• Conway, Ciara.
• Coonan, Noel.
• Costello, Joe.
• Coveney, Simon.
• Cowen, Barry.
• Creed, Michael.
• Creighton, Lucinda.
• Daly, Jim.
• Deasy, John.
• Deenihan, Jimmy.
• Deering, Pat.
• Doherty, Regina.
• Donohoe, Paschal.
• Dooley, Timmy.
• Dowds, Robert.
• Doyle, Andrew.
• Durkan, Bernard J.
• English, Damien.
• Farrell, Alan.
• Feighan, Frank.
• Ferris, Anne.
• Fitzgerald, Frances.
• Fitzpatrick, Peter.
• Flanagan, Charles.
• Flanagan, Terence.
• Fleming, Sean.
• Gilmore, Eamon.
• Grealish, Noel.
• Griffin, Brendan.
• Halligan, John.
• Hannigan, Dominic.
• Harrington, Noel.
• Harris, Simon.
• Hayes, Tom.
• Heydon, Martin.
• Howlin, Brendan.
• Humphreys, Heather.
• Humphreys, Kevin.
• Keating, Derek.
• Kehoe, Paul.
• Kelleher, Billy.
• Kelly, Alan.
• Kenny, Seán.
• Kirk, Seamus.
• Kitt, Michael P.
• Kyne, Seán.
• Lawlor, Anthony.
• Lynch, Ciarán.
• Lynch, Kathleen.
• Lyons, John.
• McCarthy, Michael.
• McConalogue, Charlie.
• McEntee, Helen.
• McFadden, Gabrielle.
• McGinley, Dinny.
• McGuinness, John.
• McHugh, Joe.
• McLoughlin, Tony.
• McNamara, Michael.
• Martin, Micheál.
• Mitchell, Olivia.
• Mitchell O'Connor, Mary.
• Murphy, Catherine.
• Murphy, Eoghan.
• Nash, Gerald.
• Naughten, Denis.
• Neville, Dan.
• Nolan, Derek.
• Ó Cuív, Éamon.
• Ó Ríordáin, Aodhán.
• O'Dea, Willie.
• O'Donnell, Kieran.
• O'Donovan, Patrick.
• O'Dowd, Fergus.
• O'Reilly, Joe.
• O'Sullivan, Jan.
• Perry, John.
• Phelan, Ann.
• Phelan, John Paul.
• Pringle, Thomas.
• Reilly, James.
• Ryan, Brendan.
• Shatter, Alan.
• Sherlock, Sean.
• Smith, Brendan.
• Spring, Arthur.
• Stagg, Emmet.
• Stanton, David.
• Timmins, Billy.
• Tuffy, Joanna.
• Twomey, Liam.
• Varadkar, Leo.
• Wall, Jack.
• Walsh, Brian.

Níl

• Broughan, Thomas P.
• Collins, Joan.
• Colreavy, Michael.
• Daly, Clare.
• Ellis, Dessie.
• Ferris, Martin.
• Fleming, Tom.
• Healy, Seamus.
• Healy-Rae, Michael.
• Higgins, Joe.
• Lowry, Michael.
• Mac Lochlainn, Pádraig.
• McGrath, Finian.
• McGrath, Mattie.
• McLellan, Sandra.
• Murphy, Paul.
• Ó Caoláin, Caoimhghín.
• O'Brien, Jonathan.
• O'Sullivan, Maureen.
• Stanley, Brian.
• Tóibín, Peadar.
• Wallace, Mick.

Tellers: Tá, Deputies Paul Kehoe and Emmet Stagg; Níl, Deputies Richard Boyd Barrett and Joe Higgins.

Question declared carried.