Thursday 7 July 2016

Peak Laffer

I wrote a post last year about HMRC figures which suggested that tobacco taxation had hit the peak of the Laffer Curve and revenues were falling despite ever-increasing taxes. Looking at the latest data today has confirmed it.

As shown in the graph below, tobacco duty revenues fell in 2015 for the third year in a row. It looks like 2012 was the year when the government milked the cash cow to its limit. The government got £430 million less from smokers in 2015 than it got in 2012.

Anti-smoking campaigners will say 'great, that shows that cigarette consumption is falling', but (legal) cigarette consumption has been falling for many years (see below). What's different this time is that the government can no longer make up for declining consumption with higher taxes, although God knows it's trying.

The jig is up.

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