The Extreme Profitability of the UK Tobacco Market and the Rationale for a New Tobacco Levy (2015)

Author: Anna Gilmore and Robert Branston                                    

Introduction

We have previously pointed towards the extreme profitability of the UK tobacco manufacturing/import market (henceforth tobacco market) when suggesting that the public interest would be served by regulating tobacco companies using utility company style price- caps (Gilmore et al.,2010; Branston and Gilmore, 2014). The profitability of the tobacco industry is now topical as the current UK government, and the main opposition Labour party, have both outlined plans for a levy on the UK tobacco industry. The basic idea is that the industry should explicitly pay more towards the costs their products impose upon society and which are currently born by all taxpayers. Implicit within this idea is that the industry is earning significant profits from which a fuller contribution could be made towards the societal costs engendered. Thus, we seek to examine the current profitability of the UK market and comment upon the different possibilities that exist for such a levy since the details are not yet fixed. To that end, in section A of this paper we explore the profitability of the UK tobacco market during the last five years, and then in Section B we comment upon the possibilities that exist for such a tobacco levy and how the industry might make a larger financial contribution. Finally our conclusions are presented in Section C.

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