Ireland - may raise tax on cigarettes as part of emergency budget..

March 31, 2009 - The Cabinet is due to meet again as part of preparations for next week's emergency Budget. Ministers met for more than seven hours yesterday to identify areas where cuts can be made and taxes increased in order to plug the massive hole in the public finances.

In the emergency budget the government may increase the price of cigarettes by €2 (1.85GBP, 2.66USD). Some commentators have warned that higher taxes will not achieve their aim of discouraging smoking and will instead just force smokers into the black market.

Speaking afterwards, the Taoiseach (Irish Government) said Irish people should expect a drop of up to 10% in their living standards over the next two years. He reiterated the need for a broadening of Ireland’s tax base, but gave no hint what taxes would be altered

Ireland vowed to show foreign investors it had a handle on buckling public finances after data showed the country's unemployment rate hitting a near 12-year high in February. Tax revenues fell by nearly a quarter in Jan-Feb from a year ago as the economy slid into its worst recession on record and Finance Minister Brian Lenihan said shrinking revenues and spending pressures threatened to push the fiscal shortfall 5-billion euros (US$8-billion) over target. (Ireland plans emergency budget in April by Carmel Crimmins and Jonathan Saul, Reuters, 3/4/2009)

Chief executive of the Irish Heart Foundation Michael O’Shea said the organisation was angered by the Government’s "apparent inability" to control the smuggling of illicit tobacco products into Ireland. "The failure by government to tackle the growth in smuggling is not a good enough reason not to protect the health of our children from cigarette smoking. This is a national disgrace," he said.

“It is not acceptable to let criminal activity dictate social measures to protect the health of our children and young people. It is not acceptable to say there will be no increase in tobacco prices – a proven deterrent to new and existing smokers – because smuggling will increase."

He called for the Minister for Justice Dermot Ahern to increase resources to deter smugglers through measures such as increased penalties and prosecutions. Contraband cigarettes account for around one-quarter of all the tobacco smoked in Ireland, according to official estimates. Ash, the Irish Cancer Society and the Irish Heart Foundation said they were shocked and outraged at the investigation aired this week by RTE's Prime Time, which found children as young as 14 were being used to sell illegal and counterfeit cigarettes around the country. The investigation found that the smuggled cigarettes were on sale openly in casual markets and estimated that each carton of 200 sold on the black market represented a loss of about €65 to the exchequer.

Reference: Government 'complacent' over cigarette smuggling by CIARA O'BRIEN, IrishTimes.com, 3/27/2009, Smuggling 'shouldn't discourage hike in cigarette prices', Belfast Telegraph, 3/26/2009, Smuggling threat 'shouldn’t discourage hike in cigarette prices', Irish Examiner.com, 3/26/2009.