Tobacco tax revised to liking of both health officials and tobacco giant
Tax raised more on loose cigarette tobacco than manufactured cigarettes
The goals of Finnish health officials and the tobacco giant Philip Morris converged in the Finnish government’s proposal for an increase in the tobacco tax.
Under the government proposal that came out on Thursday, the tax on loose cigarette tobacco will go up considerably more than initially planned.
A beneficiary of the decision is the international tobacco giant Philip Morris, which manufactures the Marlboro brand, and has a 60 per cent market share. The company is also known for its aggressive lobbying.
Although the tax on factory-manufactured cigarettes will also rise, the main losers in the move will be Imperial Tobacco, which manufactures loose tobacco and cheaper brands.
Initially the government was proposing a 15 per cent increase on loose tobacco. However, last week, the government decided to revise the increase to 25 per cent.
Also supporting a tax hike for cigarette tobacco were leading health advocates.
“There are strong health policy reasons for a greater increase for loose tobacco”, said the Ministry of Social Affairs and Health in its statement. The National Institute for Health and Welfare (THL) also felt that the change was welcome.
Although there have been warnings that sharp tax increases would lead to an increase in private imports from abroad, the Finnish Customs Service did not oppose the proposed changes.
However, the changes were not enough for Philip Morris, which said that cheaper brands and loose tobacco continue to enjoy a tax break worth millions of euros.
The main goal of Philip Morris, as well as British American Tobacco, is to change the taxation system so that the tax on tobacco would be set on a per unit basis, and not as a percentage of the price. Such a system would benefit the manufacturers of more expensive brands.
A move toward taxation on a per unit basis is actually included in the government’s policy programme. How it got there remains a mystery.
Kimmo Sasi (Nat. Coalition Party), who led the economic policy group during the government formation talks, recalls that the policy line may have come from the National Coalition Party. Both the Ministry of Finance and the Ministry of Social Affairs and Health say that it did not come from their civil servants.
Parliament is to debate the tax changes before the end of the year.
Previously in HS International Edition:
Price of cigarettes to go up by nearly 8 per cent (28.10.2011)