So what does that mean? Get this:
Tax on fags is a good way to get people to quit.
Therefore, tax on fags is high.
Therefore, consumption of (UK taxable) fags is going down.
...Tax revenue is going down.
So what do they want to do about the missing money? That's right, they want to put the tax up.
Don't just take my word for it, go have a read yourself. It's hilarious.
A recent trend in the cigarette market has been the significant growth of the cheapest cigarette category. If this trend is indicative of a market shift towards cheaper cigarettes, it presents a risk to the effectiveness of tobacco policy in its role to protect future revenues and reduce smoking rates.
Protect future revenues and reduce smoking rates, the two being obviously mutually exclusive.
Our hard or thinking HMRC want to change the tax rules so that tax isn't chargeable on the value of the tobacco, but is rather charged at a flat rate. That flat rate being the highest rate applied to all tobacco.
Estimates of cigarette category market shares, as at 2009, suggest that consumers are switching away from more expensive cigarette categories, in favour of cheaper cigarette categories. This switch is often referred to as “down-trading.” As described in a recent study of the UK cigarette market, between 2001 and 2009 the market share of the cigarette categories at the higher end of the market broadly declined while the market shares of the lower end of the cigarette market broadly increased.1 Graph 1.A is replicated from this study and illustrates these trends
Yes, as prices go up, people pick cheaper options. This reduces tax take and in order to protect that take, they want to respond by removing cheaper options.
Except they cannot remove the cheaper option of buying your tobacco abroad or even from a man in a van. Or quitting, which also doesn't help revenues.
These people are supposed to be intelligent.
So let's bring in a minimum fag tax and watch the tax take begin to plummet. You know what their response to that situation will be?
My money is on another tax hike. That should sort it!