Abstract

Background: Tobacco companies claim that higher taxes will force smokers into buying illicit tobacco, but if they were truly concerned about increasing illicit sales with higher prices they would only increase retail prices in line with changes in taxation. In this paper we explore UK pricing of both factory made cigarettes (FM) and Roll-Your-Own Tobacco (RYO) to explore the extent to which price increases were due to government tax rises or industry strategies to increase profit per pack.

Method: Nielsen commercial data on UK tobacco sales data (2010 to 2015) were combined with official UK data on inflation and tax rates, to identify the source of real price increases.

Results: Between 2010-12, when there were unexpected large tax increases, industry driven price changes were small (16% of the price rise in FM and 20% in RYO), and changes were similar between market segments. Between 2013-15, when tax increases were smaller and expected, industry behaviour generally accounted for a larger share of price rises (33% FM, 48% RYO), but changes varied considerably by segment.

Conclusion: The industry has increased its prices beyond that required by tax changes, even when tax rises were larger and unexpected, although were notably smaller in such conditions. This suggests: 1) that the industry is not actually concerned by the threat of illicit, especially since RYO had the highest levels of industry driven price increases despite higher levels of illicit; and 2) there remains scope for further tax increases, which should be relatively large and unexpected.
Original languageEnglish
JournalTobacco Control
Early online date26 Jul 2019
DOIs
Publication statusE-pub ahead of print - 26 Jul 2019

Keywords

  • Tobbaco
  • Tobacco Taxation
  • Illicit Tobacco
  • Tobacco prices

Cite this

UK tobacco price increases: driven by industry or public health? / Hiscock, Rosemary; Branston, J Robert; Partos, Timea R.; McNeill, Ann; Hitchman, Sara C.; Gilmore, Anna B.

In: Tobacco Control, 26.07.2019.

Research output: Contribution to journalArticle

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title = "UK tobacco price increases: driven by industry or public health?",
abstract = "Background: Tobacco companies claim that higher taxes will force smokers into buying illicit tobacco, but if they were truly concerned about increasing illicit sales with higher prices they would only increase retail prices in line with changes in taxation. In this paper we explore UK pricing of both factory made cigarettes (FM) and Roll-Your-Own Tobacco (RYO) to explore the extent to which price increases were due to government tax rises or industry strategies to increase profit per pack.Method: Nielsen commercial data on UK tobacco sales data (2010 to 2015) were combined with official UK data on inflation and tax rates, to identify the source of real price increases.Results: Between 2010-12, when there were unexpected large tax increases, industry driven price changes were small (16{\%} of the price rise in FM and 20{\%} in RYO), and changes were similar between market segments. Between 2013-15, when tax increases were smaller and expected, industry behaviour generally accounted for a larger share of price rises (33{\%} FM, 48{\%} RYO), but changes varied considerably by segment. Conclusion: The industry has increased its prices beyond that required by tax changes, even when tax rises were larger and unexpected, although were notably smaller in such conditions. This suggests: 1) that the industry is not actually concerned by the threat of illicit, especially since RYO had the highest levels of industry driven price increases despite higher levels of illicit; and 2) there remains scope for further tax increases, which should be relatively large and unexpected.",
keywords = "Tobbaco, Tobacco Taxation, Illicit Tobacco, Tobacco prices",
author = "Rosemary Hiscock and Branston, {J Robert} and Partos, {Timea R.} and Ann McNeill and Hitchman, {Sara C.} and Gilmore, {Anna B}",
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T1 - UK tobacco price increases: driven by industry or public health?

AU - Hiscock, Rosemary

AU - Branston, J Robert

AU - Partos, Timea R.

AU - McNeill, Ann

AU - Hitchman, Sara C.

AU - Gilmore, Anna B

PY - 2019/7/26

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N2 - Background: Tobacco companies claim that higher taxes will force smokers into buying illicit tobacco, but if they were truly concerned about increasing illicit sales with higher prices they would only increase retail prices in line with changes in taxation. In this paper we explore UK pricing of both factory made cigarettes (FM) and Roll-Your-Own Tobacco (RYO) to explore the extent to which price increases were due to government tax rises or industry strategies to increase profit per pack.Method: Nielsen commercial data on UK tobacco sales data (2010 to 2015) were combined with official UK data on inflation and tax rates, to identify the source of real price increases.Results: Between 2010-12, when there were unexpected large tax increases, industry driven price changes were small (16% of the price rise in FM and 20% in RYO), and changes were similar between market segments. Between 2013-15, when tax increases were smaller and expected, industry behaviour generally accounted for a larger share of price rises (33% FM, 48% RYO), but changes varied considerably by segment. Conclusion: The industry has increased its prices beyond that required by tax changes, even when tax rises were larger and unexpected, although were notably smaller in such conditions. This suggests: 1) that the industry is not actually concerned by the threat of illicit, especially since RYO had the highest levels of industry driven price increases despite higher levels of illicit; and 2) there remains scope for further tax increases, which should be relatively large and unexpected.

AB - Background: Tobacco companies claim that higher taxes will force smokers into buying illicit tobacco, but if they were truly concerned about increasing illicit sales with higher prices they would only increase retail prices in line with changes in taxation. In this paper we explore UK pricing of both factory made cigarettes (FM) and Roll-Your-Own Tobacco (RYO) to explore the extent to which price increases were due to government tax rises or industry strategies to increase profit per pack.Method: Nielsen commercial data on UK tobacco sales data (2010 to 2015) were combined with official UK data on inflation and tax rates, to identify the source of real price increases.Results: Between 2010-12, when there were unexpected large tax increases, industry driven price changes were small (16% of the price rise in FM and 20% in RYO), and changes were similar between market segments. Between 2013-15, when tax increases were smaller and expected, industry behaviour generally accounted for a larger share of price rises (33% FM, 48% RYO), but changes varied considerably by segment. Conclusion: The industry has increased its prices beyond that required by tax changes, even when tax rises were larger and unexpected, although were notably smaller in such conditions. This suggests: 1) that the industry is not actually concerned by the threat of illicit, especially since RYO had the highest levels of industry driven price increases despite higher levels of illicit; and 2) there remains scope for further tax increases, which should be relatively large and unexpected.

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KW - Tobacco Taxation

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