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Italiano Tax Revenue – Risk of Disinformation!
“Be careful about increasing taxes on cigarettes”, warns the Italian financial newspaper Il Sole 24 Ore «it could have depressive effects on production and on demand”.
Seeing that 99% of the cigarettes sold in Italy are manufactured abroad, it is hard to understand what production Il Sole 24 Ore is talking about. Moreover, tax increases on cigarettes do not inevitably generate sales price increases and consequent drops of demand and of tax income.
Greater fiscal pressure on cigarettes would force the producers to raise their sales prices only if they wanted to keep earning their current enormous and unjustifiable profits.
Why does Philip Morris earn more in Italy than it does in France and why does the Italian State take in less on tobacco sales than the French State? Why does the excise aliquot in Italy have to be only 58.5%, unchanged since 2003, while in France it has risen to 64%?
If Philip Morris were satisfied to earn in Italy what it earns in France, an excise tax increase would not lead to higher sales prices in the shops.
In 2005, the minimum price gave the Italian market away to Big Tobacco, that earns in our country like a tax collector: Philip Morris enjoys a profit of 495% on a pack of Marlboros; British American Tobacco makes 380% on its MSs and Japan Tobacco earns an extravagant 415% on its Camels. Meanwhile the tax income on cigarette sales in Italy is less than the tax income of other countries.
The lobby of tobacco giants naturally defends this situation, obstructing any changes, even using disinformation.
Already back in 1998, in the parliamentary hearing of the deputies Onorevoli Marengo and Leone (session no. 366 of the 3rd of June), it was admitted that “an increase of the excise aliquot and therefore an increase of tax income could be achieved without raising the prices of cigarettes to the public”.
When we worry about of a drop in consumption, we are thinking about variations that would have no effect on tax revenues, and Italy could do this. How would smokers get along in the United States where in many States cigarette prices have been raised to ten dollars a pack, or in England where a pack costs more than eight pounds? In New York State, authorities recently decided to increase taxes by 1 dollar 60 cents a pack. This measure will bring, every year, 440 million dollars more into the coffers of the State.
A similar increase in Italy of 1 euro 30 cents (1.60 dollars), multiplied by the four and a half billion packs sold here every year, would add six billion euro a year to the tax intake. And even with a sales drop, that Il Sole 24 Ore seems to be worried about, for the Italian State it would be an excellent deal.
Italian oncologists think they are in the States: last month at the European ESMO Congress that brought the oncologists of the Old Continent together in Milan, they asked for a one-euro increase on the price of every pack of cigarettes… ”Considering that the number of packs sold in one year amounts to four and a half billion, we would have four and a half billion euro more for research”. (…)
Rightly, the European Union accuses Italy of “safeguarding the interests of cigarette manufacturers, forfeiting the country's tax income”.
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