Ashtray emptier, government coffers fuller

14/03/2005 10:00

2004 was not an easy year for inveterate smokers: the government tightened up the existing Tobacco Act and substantial price increases were introduced. The new Act and the price rises resulted in a considerable reduction in smoking in 2004 compared with the preceding years. In spite of this reduction the government still received more excise revenues and VAT in 2004.

Government discouraging smoking

With the Tobacco Act of 17 July 2002 the Dutch government introduced a strict discouragement policy. In addition the prices of tobacco products were put up substantially on 1 February 2004. The prices of both a packet of 25 cigarettes and a 50 gram packet of shag were increased by 80 cents. 55 cents of this go to the government, and 25 cents to the tobacco manufacturers.

Since 1 February 2004 a packet of cigarettes in the most popular price class costs 4.60 euro; 3.36 euro of this goes to the treasury via excise and VAT. The tobacco trade and industry sector share the remainder. A 50 gram packet of shag also costs 4.60 euro. Taxes on shag account for 2.81 euro, leaving 1.79 euro for traders and manufacturers.

Price composition of cigarettes and shag

Price composition of cigarettes and shag

Consumption decreasing

After the introduction of these measures, cigarette sales dropped by 12 percent tot 14.8 billion. Sales of fine cut tobacco also decreased last year, by 8 percent to 12.1 million kg.

In per capita terms, 912 cigarettes were sold last year compared with 1,050 the year before. The consumption of shag fell by 8 percent to 741 rolled cigarettes in 2004.

Per capita consumption: cigarettes and shag

Per capita consumption: cigarettes and shag

Consumers smoke less but spend more

Although consumers bought fewer cigarettes, they spent more on them. The substantial price increases have resulted in a 2 percent increase in spending on cigarettes, to 2.7 billion euro. Smokers spent more than 1 billion euro on fine cut tobacco last year, just over 7 percent more than in 2003.

The restrictions imposed by the new Tobacco Act and the price increases introduced by government and the industry have reduced sales of cigarettes and shag. But the treasury has not suffered from this lower consumption. According to provisional results excise revenues from tobacco products was 1.94 billion euro. In 2003 it was still 1.75 billion euro.

Hans Draper

Source: StatLine