Revenue to fall as smokers quit over tax hikes

Policy makers will have to choose between the health of the nation and the health of the nation’s finances when deciding whether to hike cigarette tax in the budget.

Revenue Commissioner economists predict that revenue from cigarettes could take a hit if prices rise any further, with the reduction in the number of smokers outpacing the increase in income from higher taxes.

They look at how responsive cigarette consumption here is to price hikes and say various elasticity calculations now average at -1.8, meaning that for every 10% increase in the price of cigarettes there would be an 18% drop in consumption. That compares to an international average of just -0.3 to -0.5.