West researchers have called on the Government to impose a cap on ‘excessive profits’ generated by the region’s tobacco industry which could raise half a billion pounds a year for the taxpayer.

The scientists and researchers from the University of Bath’s UK Centre for Tobacco Control Studies said a cap on a maximum price for cigarettes and tobacco and taxing the tobacco companies’ profits
could fund, twice over, the anti-smuggling measures and the cost the NHS incurs to help people stop smoking. But the West’s biggest tobacco company, Imperial Tobacco, which has been singled ut by Bath University, hit back, saying it already pays £6 billion in tax and operates its business ‘responsibly’. The researchers from Bath University published a study outlining how cigarette firms make double the profits of most other companies. Imperial Tobacco has profit margins of 67 per cent, making it one of the most profitable companies in the UK, they said. The proposal is for the creation of an ‘Ofsmoke’agency to regulate the industry – just as Ofwat does for the water industry, which could increase tax revenue, set maximum prices for cigarettes and keep a lid on the ‘excessive’ profit.

lid on the ‘excessive’ profit. “The market has failed to curb cigarette manufacturers in terms of pricing power and profit, and tobacco control policies have unintentionally exacerbated the problem,” said Dr Robert Branston. “Clamping down on the extreme profitability of cigarettes would reduce the incentive for tobacco companies to fight public health measures and mean they have fewer funds at their disposal.” Professor Anna Gilmore, director of the university’s Tobacco Control Research Group added: “The tobacco industry is likely to argue that this type of direct economic regulation is an extreme reaction, but it’s hard to argue that nothing should be done given the extent of market power that these firms are enjoying and the number of deaths the sector causes. If it came to a choice between increasing income tax or capping the excess profits of companies whose products kill one in two users, I could hazard a guess which one the public would prefer.”

But Simon Evans of Bristolbased Imperial Tobacco hit back, and said: “Tobacco is already a highly regulated and highly taxed industry. Tax accounts for up to 90 per cent of the price of our UK cigarette
brands and Imperial generates more than £6 billion in revenue for the Treasury each year in taxes. The reality is that it’s also a fiercely competitive industry, particularly when you consider the challenge posed by the high incidence of cheap illicit tobacco products on our streets - something that’s directly caused by excessive taxation. Of course, tobacco is controversial but we operate our business responsibly and make a significant contribution to society. We’ve cemented hundreds of jobs in Bristol by choosing to build our new global headquarters in our home city and we continue to create economic wealth – last year we paid £1 billion in share dividends, benefiting millions of pension pots.” Deborah Arnott, chief executive of health charity Action on Smoking and Health, added: “They can continue to charge premium prices and make excess profits as their products are cheap to make, highly addictive and competition in such a highly regulated market is so limited. Capping their profits is not
extreme it’s essential.”

Western Daily Press
Tuesday 15, January 2013