Time to talk Tax

There is a strap-line from HM Revenue & Customs – “tax doesn’t have to be taxing” – yet despite their best efforts, if you really want to wade through the system, you are going to have to employ someone with letters after their name. The proles don’t really stand a chance of navigating the endless forms, cross referencing and waiting. Not to mention there are certain rules that need to be followed with regards to things like wage slips, P60 (end of year stuff for UK employees). Yet I’d be willing to bet that many folks don’t wholly realise how much tax they actually pay. Especially when it comes to tobacco.

Sadly, there is a belief that “the most effective approach” to controlling tobacco consumption is to impose measures in an effort to reduce demand. Things like bans, disproportionate regulation and of course creating the feeling that smokers are abnormal. But the easiest (and cheapest for these policy makers, as it doesn’t cost them an arm, a leg or two and the use of their significant other for several months) is taxation, or excise duty.

The thing with taxation on tobacco products (and no I’m not including e-cigarettes in that, ‘cos they don’t contain tobacco – yes FDA I’m looking at you, might as well look at the EU too for the inclusion of a non-tobacco product in a Tobacco Products Directive) is that many policy makers and treasuries see them as a revenue stream instead of their actual purpose – to make smoking less attractive. With the decline in smoking prevalence (both from illicit and legal tobacco sources), certain governments are looking at the newcomer to complement that revenue stream – e-cigarettes.

It is widely known that the European Commission (the ones that kickstart all legislative processes which end up behind closed doors in trialogue) have been asked to prepare a legislative proposal by 2017. There’s so much wrong with that idea, not least of all because an excise duty applied to e-cigarettes (no doubt at a similar rate to tobacco) would send the prices of kit and liquids sky-high – that’s without the VAT at 20% – no wonder then that the WHO deems taxation on tobacco “the most effective mechanism” to achieve arbitrary “health objectives”.

These “effective measures” (said with as much sarcasm and scorn as I can muster) provide no real tangible benefits to the population. Excessive taxation is effectively a punishment tax with pro-tobacco groups and individuals slamming the continual increases and the vapers friend fiend ASH saying all along that the “benefits outweigh the detrimental effects” – those detrimental effects are ever-increasing inequalities, making those in the lower end of the economic scale even worse off, all because they happen to like the odd pack of smokes – as succinctly put by Sarah Jakes:

For many people smoking could be one of their only luxuries, and it’s a social thing which people share – it could be that it means a lot more to people in those groups than it does to those with more alternatives.

But, dear reader, the Framework Convention on Tobacco Control (the benighted FCTC) likes to bleat tobacco use creates a “significant economic burden on society at large.” with “Higher direct health costs associated with tobacco-related disease” and in their Articles point out :

  • Effective tobacco taxes significantly reduce consumption and prevalence
  • Effective tobacco taxes are an important source of revenue (see? it’s never been about health)
  • Tobacco taxes are economically efficient and reduce health inequalities (really?!)
  • Tobacco tax systems & administration should be efficient and effective (erm what?)
  • Tobacco tax policies should be protected from vested interests (so place an additional tax burden on a product, but don’t let the manufacturers or any of their groups have a say? What ?)

When does a tobacco tax cease to be effective? In a broad sense, any punitive taxation becomes more ineffective as the rate of taxation increases. Referred to as the Laffer Curve one implication of the curve is that increasing taxation rate beyond a certain point will be counter-productive for raising further revenue, which would cast doubt on the key guiding principle outlined in Article 6 section 1.3.

Information provided by HM Revenue & Customs shows a clear increase in the amount of revenue that tobacco tax has generated for the UK Treasury (~£5 – 8 billion for cigarettes (excluding VAT) between 1992 (earliest recorded receipts available in the data) and 2015) – a proportion of which ends up in the grubby hands of the likes of ASH and HEG – you know, the sockpuppets.

With such a drive towards taxing the living crap out of tobacco, you’d be forgiven if policy makers had overlooked the lowly e-cigarette, that is until Fiscalis (an EU Project of course) got involved with this announcement:

OBSERVES that some of the products, such as e-cigarettes, defined in Directive 2014/40/EU on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products, do not fall into any of the categories of products subject to excise duty under Directive 2011/64/EU.

Oh how dare they? E-cigarettes aren’t under any categories subject to excise duty? That must be changed!

But there’s more:

Underscores that, in this context, a solution for excise taxation of e-cigarettes, heated tobacco, other novel tobacco products and, where relevant, of products related to tobacco products, needs to be practical and foresighted, and strike the right balance between the revenue, expenses of tax administration and public health objectives.

Well quite. Along with many US states, the EU now wants to look at the taxation of e-cigarettes. Who would have thought?

But wait, there’s more. Thanks to Dick Puddlecote this little gem cropped up in the House of Lords:

Question

Well it’s about time this kind of question was asked (not for the first time). But I wasn’t entirely surprised at the reply:

Answer

Ah, “because tobacco is not involved” they have “no plans” to impose a duty on e-cigarettes. But then they had “no plans” to introduce plain packaging either, and look how that turned out.

It’s never really been about health has it?