While the Chancellor’s budget did not make any changes to previously planned duties on tobacco, lower-priced brands were hit by a new Minimum Excise Tax (MET).
The new cigarette tax was based on a pack price of £7.35. As announced in last year’s budget, duty rates on tobacco products will increase by two per cent above the rate of inflation.
The budget was viewed as another setback for tobacco manufacturers who are gearing up for the plain-packaging legislation which is to be introduced in May this year.
“The Minimum Excise Tax represents the final instalment of a triple whammy of price increases for smokers in 2017,” Will Hill, Director at British American Tobacco UK & Ireland told Asian Trader.
“While we don’t agree with the MET, we believe Mr Hammond has taken a pragmatic approach to the rate he’s set and we’re hopeful that this will avoid a huge increase in the number of smokers turning to the cheaper black market.”
However, a statement from The Tobacco Manufacturers’ Association (TMA) claimed the new tax would encourage people into illicit avenues.
“The move will simply encourage people to buy from the black market and takes business away from the legitimate trade whilst costing the taxpayer around £2.4 billion in lost taxes in the last year alone,” said Giles Roca, Director General of the TMA, after the Budget was announced.
“Taxation on tobacco in the UK is already the highest in the EU meaning that prices in the UK are up to four times higher than in other European countries.”