UK Sin Taxes Now A 'Cash Cow' For Government: Report

by Amanda Banks, Tax-News.com, London

10 August 2017

The Institute of Economic Affairs has released a new paper saying that sin taxes more than cover the cost of the negative behaviors they target.

The UK levies a number of taxes on "undesirable" activities, such as smoking and alcohol consumption. From 2018, a new sugar levy is to be introduced to pay for some of the costs of obesity.

According to the IEA's new paper, revenue from so-called sin taxes will total GBP24.7bn (USD32bn) by 2018, with the new sugar levy expected to raise GBP500m per year.

Releasing the paper, Christopher Snowdon, Head of Lifestyle Economics at the Institute of Economic Affairs, said: "We are constantly being told that people who choose to drink, smoke, or eat too much are a burden on the UK taxpayer. This is one reason why we have seen such aggressive hikes in taxes on alcohol, smoking, and, very soon, a tax on sugar. But the justification for these taxes is based on an illusion."

The paper says that those who smoke and drink help fund the National Health Service, rather than act as a drain on resources. According to the IEA's report, the Government collects GBP9.5bn a year in duty on tobacco and GBP10.7bn annually in duty on alcohol. These revenues far exceed the cost of providing healthcare to persons suffering illness as a result of smoking or drinking excessively, the report says, and, from smoking, the Government reportedly saves GBP9.8bn annually in pension, healthcare, and other benefit payments due to premature mortality.

"Smokers, drinkers, and those who are obese actually provide a net benefit to the public finances, so vilifying them is futile in the quest to make savings for the NHS," said Snowdon."Careful consideration of the evidence shows that the popular belief that costs will fall if people live healthier and for longer is false. While it's good that we now have longer life expectancies, policymakers must now address how we tackle the financial consequences of the aging population rather than pointing the finger elsewhere."

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

To manage your mailing list preferences, please click here »