Thursday, September 24 2009

THE Government’s stance in hiking the taxes on alcohol and tobacco in the 2009 to 2010 Budget is full of contradictions and inconsistencies.

Finance Minister, Karen Nunez-Tesheira, claimed the tax-hikes would contribute to healthy lifestyles, implicitly by curbing consumption of alcohol and tobacco.

However we are concerned that the Government failed to produce sufficient evidence that alcohol and tobacco use locally is so harmful that it needs to be curbed, and that any tax-hikes imposed would in fact dampen consumption in Trinidad and Tobago.

All we heard is a relatively junior minister, in a late night contribution, claim that locally alcohol is linked to 66 percent of road deaths and 50 percent of drowning deaths, while another minister merely cited some studies done in the United States of America.

In the main however the Government simply seemed to be relying on anecdote. At last Thursday’s post-Cabinet news briefing, Mrs Nunez-Tesheira admitted that the tax-hikes had not been based on any local study done, while noting her Cabinet colleague’s had merely cited the US studies.

As if further relying just on anecdotal evidence, she also could not specify any time that Cabinet had ever sat down and adopted the position that this country had problematic consumption of alcohol and tobacco that needs to be curbed by tax-hikes. She admitted, “There is no time that the Cabinet had to sit down and do that.”

Indeed, we see an inherent contradiction in the Finance Minister in the same breath speaking about, “promoting and ensuring healthy lifestyles” through the tax-hikes — implying a governmental thrust to dampen demand — and then saying she expects the hikes to raise an extra $30 million from tobacco and an extra $50 million from alcohol. Which is it the Government is trying to do, curb consumption or raise extra revenues? You cannot say you are imposing measures to curb behaviour and in the same breath say you expect the measures to raise X dollars in punitive fines.

The Government simply cannot have it both ways.

In fact a cynical view of the tax-hikes might conclude the goal is neither. One might argue that revenue-wise, the extra $80 million in taxes from alcohol and tobacco is in itself insignificant against the backdrop of a $44 billion Budget, while on the other hand demand by hardcore users for these products is likely to be price-inelastic. On this latter, persons who suffer some degree of addiction to alcohol or tobacco by definition would not be deterred by the tax-hikes, which ironically will only impinge on the leisure of the moderate and responsible consumer. The addict will insist on his alcohol or cigarettes, and like any good businessman, will probably simply “pass on” the extra costs to those around him, meaning that little Johnny won’t be getting a new school-bag.

So, since these tax-hikes are unlikely to contribute significantly to public revenues or to curb problem-drinkers and problem-smokers, what is their purpose? We fear that they may serve simply as the thin end of the wedge and as a means for the Government to test the waters for even further possible future tax-hikes on alcohol and tobacco.

We are also concerned that these tax-hikes, purportedly done to promote healthy lifestyles, are not being done as a part of any package of measures to curb the ill-effects of excessive alcohol and tobacco consumption, such as the introduction of the breathalyser. For example, the extra revenues earned looks likely to get lost in the general Consolidated Fund, when in fact in order to really help addicts, it should perhaps be specifically allocated to a special rehabilitative initiative.

So given this concern for public health, could one now expect to see the Government lead by example? One letter-writer last week asked whether in support of trying to curb alcohol consumption, the Government would now refuse to serve alcohol at the upcoming Commonwealth Heads of Government Meeting (CHOGM). Prime Minister Patrick Manning however seems to have taken in front to scotch any such expectation by last week telling Parliament that the Government would not move to stop serving alcohol at State events as this would circumscribe people’s free will.

In general, we think that whatever merits there may be in moderating the use of alcohol and tobacco, the Government has failed to make its case.