Pricing and tax Striking the right balance is crucial British American Tobacco alone contributed approximately £30 billion to governments in excise and other taxes in 2015 - that’s more than 70% of our total gross turnover. A taxing problem Tobacco taxes provide a source of funds for many governments and can account for an important part of their revenue. Unsurprisingly, when difficult economic times reduce a country’s national budget, taxes on tobacco products are often viewed as a strong potential source of income. High taxation rates can be used to support specific policy objectives. Some governments seek to cover the costs that they consider to be associated with tobacco use, such as healthcare costs. Health advocates might also put pressure on governments to increase tobacco taxes in an effort to reduce consumption. But, do sudden and steep increases in tobacco excise taxes really cause smokers to quit in their droves or to cut down drastically? The plain answer is no. ‘Shock’ increases in tobacco taxes often fail in both of these goals as consumers increasingly look towards the black market instead. The evidence While some smokers may choose to quit, or smoke less, evidence shows that large and sudden tax rises do not always result in reduced overall tobacco consumption. In some developed countries we have seen tax rates raised to such a high level that tax revenue begins to fall, as smokers seek out cheaper, black market alternatives. A report which was jointly commissioned by the tobacco industry in Australia estimated that in the 12 months to June 2015, illicit trade cost the government around $1.42 billion in lost excise revenue. Between 2007 and 2010 the tobacco black market grew from 8.3% to 14.3% of the tobacco sold in the country. The largest annual increase during that period occurred in 2010, the same year as an increase in excise of 25 per cent. We don’t think that’s a coincidence. Hikes in excise tax may also lead to greater price differences between nearby countries, encouraging tobacco smuggling across borders. It is clear that unusually high taxes on tobacco can create opportunities for criminals and ultimately undermine governments’ revenue and health objectives. A managed solution We’re not against increases in tobacco taxes. Manageable increments, typically in line with inflation, make the most sense: governments are less likely to inadvertently fuel illicit trade and tax revenues are more predictable. Participating in a balanced debate Campaigning and engagement Our industry The global market Corporate behaviour Regulation E-cigarette regulation Plain packaging Retail display bans Alternative crops Ingredients bans Pricing and tax Framework Convention on Tobacco Control (FCTC) Campaigning and engagement Illegal tobacco trade Youth smoking prevention Search BATS: LSE GBp 4930.00 (-16.50) About us Sustainable business Our industry Challenges and opportunities How we work From crop to consumer Our products Putting consumers first Next Generation Products Capabilities, commitment, ambition Sustainability Investors Media Reporting Careers Contact us Worldwide Home Our industry Regulation Pricing and tax Explore our world We are one of the world’s most international businesses and many of our Group companies have their own websites. @BATPress BAT Science @BAT_Sci #ICYMI To view our latest Award Winning Science and Technology 2015 Report (designed by @JamesMcQuat) download her… twitter.com/i/web/status/7… 29 Sep Reply Retweet Favorite BAT Science @BAT_Sci Our Science & Technology 2015 Report has won the Golden Leaf Award at #GTNF2016 for 'Most Impressive Public Service… twitter.com/i/web/status/7… 29 Sep Reply Retweet Favorite Investors Current UK share price 4930.00p -16.50p 01/10/2016 11:10 Our reporting Contact us +44 (0) 20 7845 1000 British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG © British American Tobacco Accessibility Conditions of use Financial information Privacy policy Cookie policy Site map