Is tobacco taxation only a response to the sole concern of “filling the state coffers”?

A survey by the Molinari Economic Institute, published on October 29, 2019 and taken up by several media outlets, analyzes the particular situation of tobacco and petroleum products with regard to taxation.

Excise duty, also known as the acquis, is a very old tax which since 1 January 1993, when the European single market was created, has been generalised to all member countries under a directive which allows member states to regulate consumption, in particular of three products: petrol, alcohol and tobacco.

The data put forward by the institute to highlight certain surprising aspects of the use of this tax in France are very real; this is the case for VAT which is not calculated on the price excluding tax but on the customer price, which allows VAT to be paid on excise duties; the normal rate of 20% of the price excluding tax can thus go up to more than 100% in certain cases! It is also true to note that taxes can exceed 80% of the price of a cigarette.

However, while it is not useless to consider that these taxes are paid entirely by the tobacco or alcohol consumer, it is also not useless to know their effect on public health and to compare the revenue from these taxes with the health and social expenditure borne by the community to treat the consequences of addictions to these two practices.

Taxation and public health

On two occasions, the intelligent use of taxation has demonstrated its ability to significantly reduce tobacco consumption. Between 2002 and 2004, three major tax increases caused the number of cigarettes smoked per year in France to fall from 84 billion to 54 billion[1]. More recently, in a 5-stage tax policy program, the first major tax increase in March 2018 showed a decline in consumption of more than 11%[2] between the twelve months preceding and following this date, or approximately 1.5 million[3] fewer smokers in 1 year.

Taxation and State Revenue

Tax revenues feed the social security budget and, to a very limited extent, the State budget. While it may be legitimate to note the exceptionally high burden of tobacco taxation, it is nevertheless irresponsible to spread unfounded gossip such as "smokers are cash cows" or "the State is lining its pockets" without recalling the redistribution that is made of this taxation to treat or compensate for the effects of this addiction both in terms of health (€25.9 billion) and social (€120 billion in total)[4] As a reminder, the specific tax (excise duties) on cigarettes was around €13 billion in 2018

The health and social damage caused by tobacco must stop and taxation, together with prevention and the increase in places protected from tobacco, is the best way to achieve this objective.

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