Background Tobacco companies claim that higher taxes will force smokers into buying illicit tobacco, but if they were truly concerned about increasing illicit sales with higher prices they would only increase retail prices in line with changes in taxation. In this paper, we explore UK pricing of both factory-made cigarettes (FM) and roll-your-own tobacco (RYO) to explore the extent to which price increases were due to government tax rises or industry strategies to increase profit per pack.
Method Nielsen commercial data on UK tobacco sales data (2010–2015) were combined with official UK data on inflation and tax rates, to identify the source of real price increases.
Results Between 2010 and 2012, when there were unexpected large tax increases, industry driven price changes were small (16% of the price rise in FM and 20% in RYO), and changes were similar between market segments. Between 2013 and 2015, when tax increases were smaller and expected, industry behaviour generally accounted for a larger share of price rises (33% FM, 48% RYO), but changes varied considerably by segment.
Conclusion The industry has increased its prices beyond that required by tax changes, even when tax rises were larger and unexpected, although were notably smaller in such conditions. This suggests (1) that the industry is not actually concerned by the threat of illicit, especially since RYO had the highest levels of industry driven price increases despite higher levels of illicit, and (2) there remains scope for further tax increases, which should be relatively large and unexpected.
- hand-rolled/RYO tobacco
- illegal tobacco products
- tobacco industry
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Contributors All authors have participated sufficiently in the intellectual conception and design of this work, the acquisition and analysis of the data, and the writing and final approval of the manuscript, to take joint public responsibility for it.
Funding This project is funded by the National Institute for Health Research (NIHR) Public Health Research (PHR) programme (grant number 13/43/58). NIHR is funded by the UK Department of Health to improve the health and wealth of the nation through research.
Disclaimer The views and opinions expressed therein are those of the authors and do not necessarily reflect those of the Public Health Research programme, NIHR, NHS or the Department of Health. TRP, AG, RH and AM are members of the UK Centre for Tobacco and Alcohol Studies, a UK Clinical Research Collaboration Public Health Research: Centre of Excellence, whose work is supported by funding from the Medical Research Council, British Heart Foundation, Cancer Research UK, Economic and Social Research Council and the National Institute for Health Research under the auspices of the UK Clinical Research Collaboration (MR/ K023195/1). The responsibility for any errors lie solely with the authors.
Competing interests None declared.
Patient consent for publication Not required.
Provenance and peer review Not commissioned; externally peer reviewed.