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Finance Act 2012

Background Note

4.Smoking kills half of all long-term users and is the biggest single cause of inequalities in death rates between the richest and poorest in the UK. The Government is committed to maintaining high tobacco duty rates to support health objectives and ensure that tobacco duties continue to contribute to government revenues and fiscal consolidation. Research has consistently shown that the price of tobacco products negatively affects demand.

5.This section increases excise duty on all tobacco products by 5 per cent in real terms (in addition to the retail price index (RPI)). Pre-announced increases of 2 per cent above inflation on all tobacco product duties will be maintained in 2013-14 and 2014-15.

6.The duty increase, together with the consequential VAT, will on average increase the price of a packet of 20 cigarettes by 37p, a pack of 5 small cigars by 12p, a 25 gram pack of hand-rolling tobacco by 37p; and a 25 gram pack of pipe tobacco by 20p.

7.The estimated revenue yield from these changes is £70 million in 2012/13.

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