Business

Imperial labels Labour tobacco tax proposal ‘unjust’

Mr Miliband said the tax would target tobacco firms which make "soaring profits on the back of ill health" Image copyright Getty Images
Image caption Mr Miliband said the tax would target tobacco firms which make "soaring profits on the back of ill health"

One of Britain's largest cigarette companies has labelled Ed Miliband's plans for a new tax on tobacco as "unjust and just a bad idea".

Imperial Tobacco, whose brands include Golden Virginia and Lambert and Butler, said the policy would drive consumers "into the hands of criminals" offering cheaper products.

Labour said the proposed tax would raise £150 million a year for the NHS.

The announcement comes at a time of rising profits for tobacco firms.

The BBC's business correspondent, Jonty Bloom, said Labour appeared to be proposing a tax on tobacco companies' profits based on market share in the UK.

This, Labour said, would raise an extra £150 million a year and is based on a similar scheme launched in America in 2009.

Tobacco companies argue they already pay £12.3bn a year in tax, but much of that comprises tobacco excise duty and VAT for the Treasury, not a tax on profits.

The three biggest companies in the UK are Imperial (44% market share), Japan Tobacco International (38% market share) and British American Tobacco (8%).

Tobacco profits have also been shooting up recently, with Imperial up 16.7% last year and British American Tobacco (BAT) up 14.5%, although exports are now a far bigger market for BAT than sales in the UK.

'Totally unwarranted'

Axel Gietz, director of corporate affairs at Imperial Tobacco, told the BBC: "Targeting one individual industry that happens to be unpopular with an additional tax is totally unwarranted and unjust and just a bad idea.

"If you look at the taxation level of tobacco products in this country we are at 86% of the price of a pack of cigarettes in this country," he added.

Mr Gietz also warned that the proposed tax would "drive consumers in even greater numbers into the arms of organised criminals who run the illicit trades with tobacco products who, by the way, have no qualms about selling to children".

Giles Roca, the director general of the Tobacco Manufacturers' Association, called the tax an "anti-business idea", and said the Labour party "should be thinking of how to claw back the billions in revenue the government loses through sales of illegal tobacco in the UK".

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