The economic impact of the “business” tobacco.

4 03 2013

In Spain there are some 11 million adult smokers. The tobacco is the most cultivated non-food product in the world. Of the sale price to the public of a pack of tobacco, the 80% corresponds to taxes.

 

According to the British American Tobacco Spain published, in an article last April of 2012, tobacco taxes are one of the main sources of income of Governments in almost any country in the world.

In 2011, tax revenue that raised the State by total sales of tobacco in Spain amounted to 9.663 million euros. In recent years, the tobacco industry contributes between the 4 and the 6% the tax revenue of the State budget revenues (PGE).

In addition, Workplace Spanish tobacco production generates more than 1,600,000 direct annual wages in agriculture and a 30% among processing industries and indirect. In total, more than 20.000 Spanish families live directly or indirectly from the cultivation of tobacco.

 

Now let's see how much raises the State tobacco:

 

Collection of the State by the tobacco taxes / tax revenues of the State (including the participation of territorial authorities):

2010: 9842.3 million Euros (+4.19% respect to 2009)1

2010: Fundraising 7423 million Euros2

2011: 7253 million Euros (-2.3% respect 2010)2*

2012: 6884 million Euros (-5.1% respect 2011)2

 

* In December of 2011 the Government ordered an increase in the tobacco tax of the 24%, the second in little more than one year. That rise led to a significant increase in inflation in December to the 3%.

1Data provided by the Club of smokers for tolerance.

2Source: Ministry of finance and public administration.

 

The conclusion that any of us can be reached after reading these data is that the tobacco industry is not positive, but exceptionally positive. It generates a lot of employment and income more than succulent!

 

But, is everything positive from the point of view economic with tobacco?

 

The Health policy was assigned for the year 2009 an amount of 4.622,32 million EUR, What is meant an increase of the 4,3% compared to the previous year, When the budget was in 4.430,82 million euros.

This figure includes transfers to the autonomous communities, Since health is a regional competition. In fact, the ministerial department available only from 705 million euros.

As well, This amount is half of tobacco revenues. The State raised 9.266 million euros through excise and VAT of tobacco in 2008, which represents an increase of the 4,5% with respect to the bagging the previous year and a new historical record of this income.

From 1990, the State case has multiplied nearly by seven revenues thanks to the smokers.

However, “The total amount of costs attributable to smoking in Spain for the year 2008 was of 14.710 million euros and tobacco this year from tax revenues reached 9.266 million euros, What smoking has cost the Spaniards 5.444 million euros per year”, According to the Spanish society of Pneumology and thoracic surgery (Separ).

In the year 2008 the Spanish State paid to cover the direct health costs of only five diseases related to the consumption of tobacco (COPD, asthma, lung cancer, cerebrovascular disease and coronary artery disease) 6.870 million euros. Of this amount, the 38 per cent it went to health costs caused by COPD, that is to say, 2.610 million euros.

That same year, the cost which had Spanish companies as a result of smoking was of 7.840 million euros. Of this figure, el 76 per cent attributed to lost productivity by smoking in the workplace, el 20 percent additional cost of theeaning and conservation of plants and the rest to absenteeism by diseases related to the consumption of tobacco.

Every euro spent on preventing tobacco use saves 55 in health3.

 

Despite these other data, from the Ministry of health ensures that:

Special taxes, It is well known, they play a regulatory role of the external effects caused by certain consumption, as it is the case of alcohol and tobacco. As well as increasing revenues earmarked for the financing of health care, These taxes contribute to reducing the consumption of both products, resulting in a higher level of health.

In what refers to taxes on alcohol and alcoholic beverages, their tax rates increase a 10 por 100. In terms of the manufactured tobacco tax, the specific rate applicable to cigarettes increases a 5,3 por 100 While the &qby;ad valorem" rate is increased almost by one percentage point. 'Ad valorem' tax rates applicable to the rest of manufactured tobacco are increased in a similar proportion to global rise affecting the taxation of cigarettes by application of the new rates.

 

And finally, it should be the following question, is it true that the economic impact of the anti-smoking law has been negative?

In this sense it has pronounced Jaime Pinilla, Professor of Economics of the University of Las Palmas, in his study, "the impact of the extension of the law 28/2005 in Spain", where review that the creation of jobs in the hospitality industry to 2008 was of 34.000. Also, This study noted that during the first year of current law, the hospitality in Spain industry turnover 2.200 million euros more than the previous year. Further details of this study in favour of enlargement of the anti-tobacco law are, for example, the average growth of turnover of the fast food - in a 80 per cent, humos‐-free local are, that amounts to three percent annual.

In England, a survey showed that a 20 percent of non-smokers began to more regularly frequent the nightclubs after the entry into force of the prohibition of smoking. The Italian Federation of hospitality issued a report acknowledging that bars, cafes and restaurants had no economic damage following the entry into force of the law and noted that the public was increasing at a 9,6 per cent.

In Norway nor descended in France and regularly figures, data published by the National Institute of statistics and economic studies, They showed that earnings in bars and cafes increased a 1,2 per cent and in restaurants a 18 per cent.

In Ireland, the hospitality industry sowed alarm prior to the adoption of an anti-tobacco law that prohibited smoking in enclosed places and anticipated losses from the 25 per cent. On the other hand, a study in Dublin, following the entry into force of the ban on smoking in local closed, showed that the recruitment of staff in the sector increased an 11 per cent.

Sigismund Solano, Secretary of the SEPAR smoking area, He thinks that "health-saving data and the data of the economic impact on the hospitality industry in other countries where it has banned smoking in enclosed spaces must be sufficient to promote the expansion of the anti-smoking law in Spain, but the first reason for his approval is the prevention of public health". In this sense, Solano believes that "the extension of the law would also benefit to the sector hospitality thanks to the decrease in sick leave for their employees".

 

I'm not Economist, only physician, but after a quick search on the Internet, trying to get objective results from reliable sources, the conclusion to which I (Perhaps wrong), is that, considering only the economic aspect, the “business” tobacco, It is profitable only for non-State tobacco companies and tobacconists, but for no one else. If the negative consequences that has the consumption of tobacco in the people I add to these data, can only add to the slogan “smoking kills” the of “Smoking impoverishes us”.

 

(C). Rovira i Bassols

Médico Especialista en Medicina Familiar y Comunitaria.

 

Sources:

1- http://www.abc.es/20110119/sociedad/abci-impuestos-tabaco-201101190130.html

2- http://www.bat.com.es/group/sites/BAT_7L6DGZ.nsf/vwPagesWebLive/DO7LAGN4?OpenDocument&SKN = 1

3- http://www.libertaddigital.com/economia/los-ingresos-fiscales-del-tabaco-duplican-el-presupuesto-del-ministerio-de-sanidad-1276362503/4-

5- http://neumologia.publicacionmedica.com/spip.php?article159

6- http://www.burbuja.info/inmobiliaria/burbuja-inmobiliaria/394077-gasto-publico-sale-rentable-ejemplo.html3

7- Update of the stability programme. Kingdom of Spain. 2012-2015. Link here.

8- Health expenditure and its financing: evolution, trends and thoughts for the future. http://www.revistaasturianadeeconomia.org/raepdf/35/P45URBANOS.pdf


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