The Framework Convention Alliance for Tobacco Control

Exposing Big Tobacco's tax hike myth in Germany


By Dr. Tobias Effertz
Universität Hamburg

Big Tobacco argues that tax hikes accelerate cigarette smuggling in Germany. However, what the tobacco industry forgets to mention is that higher prices actually pushed one million smokers in Germany to quit between 2005 and 2009.

The industry´s strongest argument against higher taxes on tobacco products is that more smokers will turn to untaxed and smuggled cigarettes. Untaxed cigarettes are bought legally in countries with lower prices, like Poland and the Czech Republic, and brought into Germany.

To back up this argument, the tobacco industry in Germany regularly announces the results of a study based on analysis of discarded cigarette packages, which inevitably shows more smokers using untaxed or smuggled cigarettes.

Recently, these arguments seemed to receive support when researchers from giant accounting firm KPMG announced similar results from an analysis of discarded packets. But let's look at the facts beyond the headlines.

Of course, tobacco smuggling exists and Germany is affected by it. The country's central location in Europe and the large gap in tobacco prices compared to neighbouring Poland and the Czech Republic can explain the existence of some untaxed and even smuggled cigarettes.

However, this has nothing to do with the tobacco tax policies of the German government. Recent research by the University of Hamburg (Effertz Schlittgen, 2012) revealed no statistically justifiable link between the price of cigarettes and the amount of untaxed or smuggled cigarettes in Germany.

You might think that doesn't make sense, since smokers will gravitate toward lower-priced cigarettes when confronted with tax increases. However, what can't be overlooked is that nearly one million smokers quit in Germany between 2005 and 2009, mostly due to price increases. When you quit smoking you do not need cigarettes, neither legal nor smuggled ones.

In other words, the public health approach of using tax increases to discourage smoking in Germany has been very successful. Unfortunately, the current situation – a tobacco tax schedule that regularly increases taxes but by less than the inflation rate – is a step backward, and the result of tobacco industry lobbying.

Furthermore, the industry's research ignores accepted scientific practice. It is no coincidence that the so-called randomly selected sample points in its 'Discarded Packages Study' are near the border or along the highways most often associated with smuggling routes.

Finally, the industry must explain why its argument that tax increases lead to more smuggling is not valid when the industry itself increases tobacco prices.

One of the greatest challenges for tobacco control advocates, and supporters of public health in general, remains to expose this argument of the tobacco industry, particularly for politicians who are its main targets.

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