Featured Research

from universities, journals, and other organizations

Tobacco companies keep people smoking despite UK cigarette tax increases

Date:
April 16, 2013
Source:
Wiley
Summary:
The tobacco industry keeps the price of its cheapest cigarettes virtually static despite annual increases in tobacco taxes, circumventing the United Kingdom's public health policy to reduce smoking through higher prices.

Raising tobacco prices is one of the most effective means of reducing tobacco use, particularly among price-sensitive smokers such as young people and people with low incomes. But when the UK government has been raising cigarette taxes to increase prices and deter smoking, tobacco companies have been absorbing the tax increases on their ultra-low-price (ULP) brands to keep their prices low. As a result, real ULP cigarette prices have remained virtually unchanged since 2006 and their market share has doubled, suggesting that as cigarette taxes rise, many smokers downtrade to cheaper cigarettes and carry on smoking.

Transnational tobacco companies categorise cigarette brands into four price segments: premium, mid-price, economy, and ultra-low-price (ULP). A research report published online today in the journal Addiction reveals that while the real weighted average price of premium, mid-price and economy brands has increased gradually between 2001 and 2009, the real price of ULP cigarettes has barely changed since 2006, greatly reducing the effectiveness of cigarette taxes to deter smoking.

Tobacco companies have achieved this by overshifting taxes on their higher priced brands (increasing cigarette prices on top of the tax increases) and undershifting taxes on their ULP brands (absorbing tax increases so they are not passed on to the consumer) to keep the prices of their cheapest brands low. The former enables tobacco companies to increase their profits while the latter helps keep smokers in the market.

Unsurprisingly, the market share held by price-static ULP cigarettes doubled between 2006 and 2009, while the market share of the other three categories has fallen. But the rising prices of the more expensive brands means that, even with a falling market share, revenue from premium and mid-price brands has increased steadily since 2001.

Says lead author Anna Gilmore, Professor of Public Health & Health Foundation Clinician Scientist in the University of Bath's Department for Health and the UK Centre for Tobacco Control Studies, "Tobacco companies use their price changes to win two ways in the UK: when tobacco taxes increase each year, the tobacco companies hide their price increases on more expensive cigarettes behind the tax increases, making large profits from smokers who aren't bothered by price increases. Simultaneously, they cut the prices of their cheapest cigarettes so that smokers who would be deterred by price hikes continue to smoke. Tobacco company revenues increase and fewer smokers quit. To increase the effectiveness of cigarette taxes, the UK government must find ways to narrow the price gap between the cheapest and most expensive cigarettes and prevent tobacco companies from discounting their cheapest brands."


Story Source:

The above story is based on materials provided by Wiley. Note: Materials may be edited for content and length.


Journal Reference:

  1. Anna B. Gilmore, Behrooz Tavakoly, Gordon Taylor, Howard Reed. Understanding tobacco industry pricing strategy and whether it undermines tobacco tax policy: the example of the UK cigarette market. Addiction, 2013; DOI: 10.1111/add.12159

Cite This Page:

Wiley. "Tobacco companies keep people smoking despite UK cigarette tax increases." ScienceDaily. ScienceDaily, 16 April 2013. <www.sciencedaily.com/releases/2013/04/130416085422.htm>.
Wiley. (2013, April 16). Tobacco companies keep people smoking despite UK cigarette tax increases. ScienceDaily. Retrieved August 20, 2014 from www.sciencedaily.com/releases/2013/04/130416085422.htm
Wiley. "Tobacco companies keep people smoking despite UK cigarette tax increases." ScienceDaily. www.sciencedaily.com/releases/2013/04/130416085422.htm (accessed August 20, 2014).

Share This




More Health & Medicine News

Wednesday, August 20, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Ebola-Hit Sierra Leone's Freetown a City on Edge

Ebola-Hit Sierra Leone's Freetown a City on Edge

AFP (Aug. 19, 2014) Residents of Sierra Leone's capital voice their fears as the Ebola virus sweeps through west Africa. Duration: 00:56 Video provided by AFP
Powered by NewsLook.com
101-Year-Old Working Man Has All The Advice You Need

101-Year-Old Working Man Has All The Advice You Need

Newsy (Aug. 19, 2014) Herman Goldman has worked at the same lighting store for almost 75 years. Find out his secrets to a happy, productive life. Video provided by Newsy
Powered by NewsLook.com
Researcher Testing on-Field Concussion Scanners

Researcher Testing on-Field Concussion Scanners

AP (Aug. 19, 2014) Four Texas high school football programs are trying out an experimental system designed to diagnose concussions on the field. The technology is in response to growing concern over head trauma in America's most watched sport. (Aug. 19) Video provided by AP
Powered by NewsLook.com
American Ebola Patient Apparently Improving, Outbreak Is Not

American Ebola Patient Apparently Improving, Outbreak Is Not

Newsy (Aug. 19, 2014) Nancy Writebol, an American missionary who contracted Ebola, is apparently getting better, according to her husband. The outbreak, however, is not. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins