Economics - Duty

The UK has the highest rates of duty on cigarettes and beer in Europe. Smokers and drinkers have long complained that they, along with car owners, seem to be paying a disproportionate amount in to government coffers. Those who smoke, drink and drive a car are particulalry displeased, subsidising, as they are, those who do none of these. Successive governments have never really explained why the duty on these items needs to be so high, and it's ironic that if the revenue raised is essential for continued financial stability of the country then, were we to follow the government's advice to stop drinking and smoking, and chose alternative means of transportation, this revenue would cease completely.

Claiming that high duty is required to counter the increased costs to the health service as illnesses caused by smoking and drinking present themselves is a simplistic argument if the savings made by people choosing to terminate their lives before needing long term health care or even drawing a pension aren't taken into account. Closer economic unity and cross-border integration has meant that it is now easier than ever before to purchase goods abroad without the complexities there once were. The European market is open to all. Where UK residents would complain about the cost of goods purchased in Britain when compared with cheaper goods overseas, they now have the choice of jumping in their cars, going abroad and bringing back their goods from wherever they feel like.

Whilst the winners are celebrating their liberation, the government is outraged. But it's legal and it's the free market that both the Tories and New labour want us to embrace with open arms. But when we do, we are condemned by the very same government which declares itself to be fighting the consumer's corner against 'Rip-Off Britain', but is the biggest instigator of Rip-Off itself. Complaints that they are loosing millions of pounds in unpaid duty are met with ambivalence by those who are benefitting from the cross-border market. The only supporters the government have are those who don't partake in using the imported goods, and see themselves soon to be footing the shortfall, and those who aren't able to undertake international purchasing or have such a little islander mentality that they reject the concept out of hand.

If the government wants to stem the tide of cheap imports it has two choices; either banning imports, which would be against European Law, or reducing the duty so it was not economic to purchase from oversea sources. The government is in a lose-lose situation; if it doesn't reduce duty then the trade in imports will continue and it will lose revenue it hopes to see, if it does reduce duty then it gives up its hope of even seeing that duty in the first place.

The government is considering introducing a £1.5bn 'windfall tax' against tobacco companies in a bid to claw back taxes that have been lost because of smuggling. They accused the companies of profiting by exporting billions of cigarettes 'knowing' they would be brought back. At the same time, the government spends millions of pounds a year in a bid to get people to quit smoking which, presumably, would result in a loss of tax. How this shortfall would be re-couped has not been announced.

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