The profitability of the Irish tobacco market and the benefits of a new levy on tobacco company profits

Using available financial information, this report develops a series of profit estimates for the firms operating in the Irish tobacco market which show they are significantly more profitable than other European consumer staple companies. Between 2010 and 2012 the industry is found to have earned more than €110m annually in profits, and it could quite conceivable have been as high as €150m. Such profits give the large transnational tobacco companies the financial means and a concomitant strong incentive to fight any public health measures that might disrupt the continuation of the tobacco market in its current form. An attractive policy response identified would be for the Irish government to implement a special tobacco levy that is imposed on each company as a proportion of the profits they generate in the Irish market. Such a levy imposed at a rate of 25% would have raised between €27m and €38m annually in each of the years studies. Such revenue could be used to address tobacco related harm, such as funding cessation services, but would also start to address the massive level of profit being earned at the expense of Irish consumers. Furthermore, such a levy could also help facilitate a longer term move towards the direct regulation of tobacco prices which would be even more beneficial. To allow for this future policy possibility, the forthcoming review of the EU Tobacco Tax Directive needs to be used to make appropriate revisions. In the process of developing the estimate of industry profits, current accounting and reporting practices are also identified as being worthy of examination and reform.