Raising taxes on “old reliable products” such as cigarettes in the next budget could be counterproductive, the government has been told.
In a strategy document prepared by the Ministry of Finance, the coalition is informed that the increase in the cost of cigarettes in the next budget could encourage more smokers to source products outside the state,
He said the Revenue Commissioners had warned that increases in excise duties might not lead to increased yields, as rising cigarette prices in Ireland could reduce demand due to greater incentives to buy products. tobacco from other jurisdictions as well as replacing them with electronic cigarettes.
The Republic has some of the highest tariffs on tobacco products, including cigarettes.
Excise rate increases of € 0.50 on cigarette packs have been implemented in each of the last six budgets. This means that the average price of cigarettes increased by around 24% between March 2017 and March 2021.
“As a high excise member state, there is a clear incentive for some smokers to import duty-paid non-Irish tobacco products into Ireland from other member states which have significantly lower tobacco taxes,” the document says.
Revenue predicts that total tobacco product yields will reach 1.26 billion euros this year. Revenue seized 48.2 million cigarettes worth 32.8 million euros last year. This compares to 13.4 million cigarettes worth € 8.6 million in 2019.
The newspaper says there are currently few incentives to import cigarettes from the north, as they remain cheaper here.
Elsewhere, the Tax Strategy Group says that due to the coronavirus pandemic, it has not been possible to fully assess the full impact of the changes to the € 50,000 relief for bookmakers introduced in the 2020 budget, or the increase in betting rights included in the budget for the previous year. .
The group says Revenue has expressed concerns about increasing the amount of the betting duty exemption, saying it would only benefit a very limited number of operators while adding to aid compliance. State associated with it.
As far as alcohol is concerned, and although the increase in excise cuts is seen as having boosted microbreweries, the group’s strategy paper suggests opposing further changes.
“Since the microbrewery relief is already set at the maximum rate allowed by EU rules and the current production threshold ensures that all microbreweries are included, there is no compelling reason to improve further this regime for the moment, ”he says.
Finally, the group’s document also proposed the option of a 7.5% reduction in excise duty on alcohol in the 2022 budget, as suggested by the Drinks Industry Group of Ireland. DIGI says the move would help the beverage and hospitality industry bounce back from the pandemic and boost employment levels.