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Tobacco tax hikes “good for the health”

tobacco tax stampFirst published: March 6, 2010

Source: Reuters via Kate Kelland’s blog

LONDON (Reuters) – Raising tobacco taxes by 5 percent above inflation in Britain would help 190,000 smokers to kick the habit and save the nation’s health system over 20 million pounds a year, campaigners said on Saturday.

A report by an independent economist for the anti-smoking group ASH said tax hikes would also cut smoking-related absence from work, saving 10 million pounds a year, and boost annual government tax revenues by more than 500 million pounds.

“An above-inflation rise in the price of tobacco is good for the health of the individual as well as for the health of the country,” said Howard Reed, the economist who wrote the report.

The findings prompted ASH and 49 other health groups, including the British Heart Foundation and Cancer Research UK, to urge Prime Minister Gordon Brown to raise tobacco prices by 5 percent above inflation in the upcoming budget, and by at least the rate of inflation in the following 3 years.

Brown is expected to outline his government’s tax and spending plans later this month in a budget that will be the last for his government before an election expected in May.

Tobacco is already subject to high levels of tax in many countries, including Britain, where tax accounts for more than 75 per cent of the retail cost of a typical packet of cigarettes. A pack of 20 cigarettes costs around 6.20 pounds.

Smoking kills more than 5 million people a year, and the World Health Organisation wants governments to introduce and impose stricter anti-smoking policies in public places and curb sponsorship and advertising by tobacco firms.

Reed and ASH said smoking imposes “significant costs” on the British economy through increased spending by the state-funded National Health Service (NHS) smoking-related health problems and increased death rates for smokers of working age.

Because smoking is so highly addictive, it is important that children are put off as early as possible, they said.

“Smoking is a childhood addiction and not an adult choice. By increasing tobacco taxation we help discourage children from buying cigarettes,” said ASH chief executive Deborah Arnott.

Around 10 million adults in Britain smoke, and two thirds of them started smoking before they turned 18. Experts say smoking related diseases cost the NHS 2.7 billion pounds a year.

Reed used cost benefit analysis and public finances analysis to calculate the economic and revenue benefits of raising taxes. He found that over the first five years after a 5 percent above inflation tobacco tax hike, the economic benefits as a whole would be an average of 270 million pounds a year.

Joy Townsend, a professor of health economics at the London School of Hygiene and Tropical Medicine, praised the report.

“It uses sound well-developed economic models, which illustrate most effectively how great an impact raising taxes can have in reducing the demand for tobacco, and the clear and significant benefits for both public health and public finances,” she said in a statement.

Reporting by Kate Kelland, editing by Tim Castle

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