UK: Duty on Hand-rolled Tobacco Rises 5% in Budget

Source from:  Financial Times 03/17/2016

A new tax on hand-rolled cigarettes in the UK Budget saw millennials immediately take to the internet to express their discontent.

"Harsh 3 percent extra rise for those who smoke rollies, often people who can't afford proper fags #rollyourown #budget2016," said one. "This is going to knacker my Vanilla Coke and rollies diet. #Budget2016," said another - with an added complaint at a sugar tax on soft drinks.

The chancellor George Osborne said the duty on hand-rolled tobacco would increase 5 per cent - making a 30g pack 44p more expensive, according to Action on Smoking and Health. This compares with an above-inflation tax increase of 2 per cent on manufactured cigarettes - or 21p on a pack of 20 cigarettes.

He also announced an "effective floor" on the price of cigarettes, but said the tax on beer, cider and spirits will be frozen.

The move on hand-rolled tobacco is intended to close the price gap between so-called rollies and straights as the proportion of smokers rolling their own cigarettes increases because of the squeeze on wallets since the financial crisis.

According to Office for National Statistics data, the volume of rolling tobacco consumed in Britain has increased 75 per cent since 2007, compared with a 28 per cent decline in the volume of tobacco smoked through cigarettes.

The chancellor hopes the new tax will raise £10m a year, but according to the Tobacco Manufacturers' Association, which represents cigarette makers, the change will compound a "failing tax policy" by causing smokers to switch to cheaper, black market cigarettes.

JTI, which manufactures the UK's most popular rolling tobacco by sales, Amber Leaf, said: "With the UK government's own figures showing that tobacco smuggling cost £2.1bn in tax revenue last year, this raising of cigarette duties by 2 per cent above inflation and hand-rolling tobacco by 5 per cent above inflation is another incentive for smugglers as it will further widen the price between legitimate and illegal products."

Mr Osborne added that he would crack down on illicitly traded tobacco through a £31m investment in border forces that will specialise in seizing smuggled tobacco. He hopes the plan will add more than £20m a year to the exchequer through increased tax revenues.

Deborah Arnott, chief executive of ASH, welcomed the rules, which she said would increase the entry price for new smokers.

"The new tax structure will increase the effectiveness of taxation and encourage more people to quit," she said. "It will also help close the gap in health inequalities." Enditem