THE finance ministry Wednesday raised concerns about the implications that proposed anti-tobacco legislation could have on the government’s revenue.

The ministry’s written submission was discussed at a meeting of a select committee of Parliament studying proposals for tobacco control.

In fact, on Wednesday when parliament’s Select Committee on Human Resources and Social Development, headed by Dr Donald Rhodd, looked at a submissions from several government ministries, the submissions generally lacked support for the stringent controls proposed by the Ministry of Health.

The Ministry of Finance and Planning said that the Ministry of Health’s tobacco control proposals suggested that implementation of legislation based on those proposals would have budgetary implications. It also pointed out that the Ministry of Health is to collaborate with other ministries and agencies to look at the impact of the proposals on the economy.

Referring to government’s expectation of a yield of approximately $1 billion yearly from the imposition of a 23 per cent excise on tobacco, which will help to finance the National Health Fund (NHF), the ministry noted:

“It is being proposed that an increase in the real price of cigarettes will reduce consumption marginally and that increased taxation is expected to increase revenue. While this may be so in the short run, when the desired objective is achieved (marked reduction in demand and supply of tobacco) the revenue will be adversely affected. It therefore means that the NHF for instance, will have to seek alternative financing (probably from government) to fill the gap or they may have to reduce the benefits offered.”

“.If another substantial tax package is imposed it is likely that the company may be forced into diverting its operations solely into distribution, thereby opening up the market to more players. This, in itself, will likely have some impact on the revenues, if the Customs Department is not able to effectively monitor imports,” said the finance ministry.

The ministry also warned that the revenue contribution to the Consolidated Fund from cigarettes would be reduced and persons who are directly or indirectly employed to the industry may lose their jobs.

The finance ministry said that this would create an additional burden on the government to provide, for example, health care under the NHF for these persons. “Alternative employment would have to be looked at for the many who earn their livelihood by this means,” it added.

The submission stated that the government would also have to provide funds to finance the Ministry of Health’s healthy lifestyle programme, which educates the public about the dangers of smoking; provide tobacco-use cessation programmes that have been proposed; and provide institutional support for tobacco control, capacity building, applied research, routine surveillance, monitoring and programme evaluation.

In addition, the ministry warned of the implications of budgetary provisions to finance legal interventions in seeking to recover the cost of smoking-related illnesses from the companies via litigation and in implementing amended legislation against smuggling.

In terms of the proposal to prohibit the sponsorship of sporting and other events by tobacco companies, the ministry said that this initiative would have a negative effect on budgetary provisions in respect of community-based objectives.

According to the finance ministry, the Ministry of Health’s efforts to collaborate with other ministries and agencies to look at the impact of its proposals on the economy, should look critically on the impact the proposals would have on the country in monetary terms.

“It will be difficult to quantify the tax revenue effects of the various control measures that the Ministry of Health has been proposing to reduce tobacco consumption. They have not indicated the level of reduction desired, nor have they indicated whether there should be complete closure of the local manufacturer. If the intention is to reduce consumption at the expense of closure of the manufacturer, then the full revenue loss from the company will be partially made up from the import side. However, there is the likelihood of some amount of fraud or illegal activity taking place.”

Figures provided by the finance ministry showed that a total of $2.3 billion was collected by the government in taxes on tobacco in 2002/2003 including; $1.4 billion from the Special Consumption Tax; $641 million from General Consumption Tax (GCT); $136 million from Corporate Income Tax; $50 million from PAYE; and $11 million from Education Tax.

Meanwhile, the Ministry of Commerce, Science and Technology, in its submission, warned against the movement of youngsters, in particular, from smoking tobacco to the use of ganja and other illegal drugs.