Business

Smoking ban burning into Gov't coffers

BY BALFORD HENRY Senior staff reporter henry@jamaicaobserver.com

Monday, January 13, 2014    

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THE Government has acknowledged that the smoking ban introduced last July by the minister of health is having a significant negative impact on its revenue projections for the current fiscal year.

In its Fiscal Policy Paper 2013/14 Interim Report tabled in the House of Representatives late December, Minister of Finance and Planning Dr Peter Phillips pointed to a significant decline in taxes from tobacco sales as one of the primary reasons for the shortfall in tax revenues up to then.

"A significant decline in receipts from tobacco, as a result of the smoking ban in public spaces, effective July 15, 2013, also contributed to the reduction in SCT (Special Consumption Tax)," Phillips noted in the report, which is to be studied by Parliament's Public Administration and Appropriations Committee (PAAC) on Wednesday.

The minister has since confirmed the report in interviews with the media but has maintained that no new taxes will be introduced to cover a widening gap in revenue projections expected to continue into 2014/15.

Phillips is also insisting that while the revenues are being impacted by the ban, the revenue targets for 2013/14 will not be changed.

He first made the statement while responding to questions from former Opposition spokesman on Finance Audley Shaw, who expressed concern in the House about the revenue loss implications for both the industry and the Government from a reduction in cigarette consumption, up to next March when the current financial year ends.

"We will continue to monitor the situation, but I want to make it absolutely clear that the revenue numbers that the government announced will remain, and that there will be no slippage in relation to overall targets for revenue," Phillips responded.

Shaw insisted then that the Government was "operating in the dark" because although the ban was imposed on cigarette consumption and not cigarette sales, it should have been obvious that sales would have been affected.

"The issue, therefore, will have to be how will that be replaced, going forward," Shaw commented.

Dr Phillips responded that, "all things being equal", there would be a reduction in consumption, but there was no indication of the pace at which the reduction would occur.

One of the areas which is being seriously affected by the reduction is the National Health Fund (NHF). Cigarette producer Carreras says that the bulk of the approximately $11 billion in taxes on cigarettes finances up to 75 per cent of the NHF's activities. However, communications director at the Ministry of Health, Neville Graham, is insisting that only 25 per cent of the NHF's budget is actually financed by cigarette tax revenue.

Graham also conceded that the smoking ban was affecting receipts from cigarette sales, but explained that when it was first raised by Carreras last year there was no evidence to support the claim.

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