Tax increases on cigarettes - are shopkeepers making a fortune?

Roger_007

It has become a virtual certainty that the duty on tobacco products is substantially increased in every budget. It is a no-brainer that if you are a seller of tobacco products, you would massively stock up before the budget and make a huge windfall profit afterwards by selling at the new price immediately after the budget on stock that you bought at the old price.
I was just wondering if this would be regarded as unacceptable profiteering or just a normal perk of the business.
I used to work part time in a pub and I noticed that stocks would be built up before a budget in anticipation of an increase in duty, (although the increase did not always happen).

RayM

I used to work in a shop that continued to sell them at the old price until stocks had run out. I'm not sure how legal that was, but it went down well with the customers. Most of whom have probably since died from cancer or emphysema.

entropi

This and any usual increase on tobacco or alcohol should and would only increase profits for the Government, not any private entity, once the increase comes into effect, right? Buying in bulk beforehand wouldn't make a difference, surely?

Jim Bob Scratcher

The Increases fall nicely for those selling on the black market

about 80percent I think is tax - ciggerattes are worthless to retailers

Roger_007

Renata Squeaking Thinner wrote: »

about 80percent I think is tax - ciggerattes are worthless to retailers

Why would any retailer sell any product if it's worthless to them. It's worth a great deal if they can pocket the tax increase that they didn't pay when they bought the product.

Vic_08

Roger_007 wrote: »

Why would any retailer sell any product if it's worthless to them.

Because it gets people into the shop where some will buy other stuff with higher margins.

ArchXStanton

Roger_007 wrote: »

Why would any retailer sell any product if it's worthless to them. It's worth a great deal if they can pocket the tax increase that they didn't pay when they bought the product.

I used to work in a wholesale,they used to stock them because people wanted them too,in reality they made feck all off them,it was just a case of having them

freshpopcorn

Roger_007 wrote: »

Why would any retailer sell any product if it's worthless to them. It's worth a great deal if they can pocket the tax increase that they didn't pay when they bought the product.

Every shop nearly has products similar to this!

howyanow

Cigarettes and Tobacco don't give a good profit margin for retailers so some retailers would look at it as an opportunity to boost margin briefly.other side of it is that cigarettes and Tobacco is expensive stock and a theft risk so some retailers may only slightly increase pre budget order.cigarette lighters is where the retailer will make decent margin

howyanow

entropi wrote: »

This and any usual increase on tobacco or alcohol should and would only increase profits for the Government, not any private entity, once the increase comes into effect, right? Buying in bulk beforehand wouldn't make a difference, surely?

No the retailer has an opportunity to benefit as they pay tax on their purchases not on what they sell.

harry Bailey esq

Jim Bob Scratcher wrote: »

The Increases fall nicely for those selling on the black market

It sure does. The lads on Moore St usually knock the price of a pouch of snout up in line with the budget though. Win win situation for everyone bar the smokers as usual.

Fr_Dougal

For smokers it's much better value now to avoid short breaks in Ireland, pop over to Spain/Holland/Portugal for a weekend. Stock up on smokes, nicer surroundings and better value for accommodation/food etc. Every carton of 200 is a saving of ~€50.

Sue Pa Key Pa

It is very expensive to insure cigarettes and tobacco, doubt it makes retailers any real money

Cee-Jay-Cee

I worked in an off licence years ago and we done a stock take once a month. I was told not to bother with the cigarettes when doing the stock take as they made so little on them it wasn’t worth the time or effort. I think there’s only a few % profit on them for the retailer, about 20% for the manufacturer and the rest is excise/tax.

Kimbot

RayM wrote: »

I used to work in a shop that continued to sell them at the old price until stocks had run out. I'm not sure how legal that was, but it went down well with the customers. Most of whom have probably since died from cancer or emphysema.

Actually that is what shops are supposed to do, clear the existing stock at the norla price and any newer stock is at the higher price.

BrokenArrows

Roger_007 wrote: »

Why would any retailer sell any product if it's worthless to them. It's worth a great deal if they can pocket the tax increase that they didn't pay when they bought the product.

They still plenty of stuff that doesnt make them money but stock them anyway because people will buy that along with other things.

Same a shops selling lottery tickets. They dont earn much from it but it brings people into the shop.

TallGlass

Cee-Jay-Cee wrote: »

I worked in an off licence years ago and we done a stock take once a month. I was told not to bother with the cigarettes when doing the stock take as they made so little on them it wasn’t worth the time or effort. I think there’s only a few % profit on them for the retailer, about 20% for the manufacturer and the rest is excise/tax.

That's odd where I worked they where in a cage with high value alcohol. Counted weekly!

Hooks Golf Handicap

All the whinging that old Mary makes a few extra quid on smokes.
Meanwhile that tube of Pringles that was €2 last week has gone back up to €3.25 & nobody is out side with their pitchforks.
Usual Irish begrudgery, nothing more.

Kimbot

Hooks Golf Handicap wrote: »

All the whinging that old Mary makes a few extra quid on smokes.
Meanwhile that tube of Pringles that was €2 last week has gone back up to €3.25 & nobody is out side with their pitchforks.
Usual Irish begrudgery, nothing more.

Dont get me started on the pringles man, the supposed reason for the price hike is they were 190g now are 200g yet the packets are the same size and weight as before so they are blatantly robbing us

howyanow

Cee-Jay-Cee wrote: »

I worked in an off licence years ago and we done a stock take once a month. I was told not to bother with the cigarettes when doing the stock take as they made so little on them it wasn’t worth the time or effort. I think there’s only a few % profit on them for the retailer, about 20% for the manufacturer and the rest is excise/tax.

They should have counted the cigarettes weekly as they are high value goods and easy to steal.if one box went missing it could take selling 20 boxes to make up for the loss if one.margin is about 5per cent on them afaik

BrokenArrows

howyanow wrote: »

They should have counted the cigarettes weekly as they are high value goods and easy to steal.if one box went missing it could take selling 20 boxes to make up for the loss if one.margin is about 5per cent on them afaik

Good point.
However does the retailer buy from the supplier with the full tax included or is it the retailers responsibility to add on the tax + margin?

elperello

Retailer buys at wholesale price which includes duty.

thesandeman

My local garage tried to buy their usual stock two weeks ago but their supplier refused to sell to them until after the budget. By yesterday they had only a few random packs lying around.
Looks like it was the wholesaler who was making the killing in that case.

etselbbuns

Tesco have reduced JP Blue from €10.10 to €10.00 and Cutters Choice 30G from €15.95 to €15.00
Why?

McCrack

Horrible things, government should have put a 5er on a packet.

Price is a huge motivator to make people stop.

machiavellianme

McCrack wrote: »

Horrible things, government should have put a 5er on a packet.

Price is a huge motivator to make people stop.

Is it? Try telling that to a smoker. It has nothing to do with price anda lot to do with addiction and perceived stress.

McCrack

machiavellianme wrote: »

Is it? Try telling that to a smoker. It has nothing to do with price anda lot to do with addiction and perceived stress.

Im talking about motivation to stop and price is a huge motivator, not the only one of course but a big one nonetheless

MadDog76

McCrack wrote: »

Horrible things, government should have put a 5er on a packet.

Price is a huge motivator to make people stop.

Naive opinion .......... every time the price of cigarettes go up results in more smokers turning to the Black Market, ie. further funding Organised Crime.

CeilingFly

A €12 pack of cigs is made up of

Vat €2.24
Duty €6.88
Total Tax €9.12

Retail margin usually about 60c-80c
Manufacture's price ex duty is less than €2 - and about 20% of that is marketing, so the cheaper brands and those made in places like China where quality tobacco leaf is not a real concern, can be manufactured for about €1 per pack 20.

As for shops stocking up to make an extra 50c per pack? - Far far easier ways to make 50c than stock up on a product with a tiny margin and the security issues surrounding it.

etselbbuns

CeilingFly wrote: »

A €12 pack of cigs is made up of
Vat €2.24
Duty €6.88
Total Tax €9.12

My post above points out that Tesco have reduced JP Blue 20s by 1% to €10.
But why would they do that for something that addicts will buy?

nice_guy80

smokers always buy sweet stuff

McCrack

MadDog76 wrote: »

Naive opinion .......... every time the price of cigarettes go up results in more smokers turning to the Black Market, ie. further funding Organised Crime.

Yes, and many more will stop completely

Berserker

Sue Pa Key Pa wrote: »

It is very expensive to insure cigarettes and tobacco, doubt it makes retailers any real money

Correct. Coffee machines on the other hand are a gold mine, according to the owner of my local Maxol station.

I can't believe cigarettes are €12 a pack. How on earth do part-timers or students afford to smoke? Never mind smoking and going out drinking.

I've no idea of the evidence but I assume the price hikes are shown to put people off taking it up in the first place.

Jim Bob Scratcher

30 grams of rolling tobacco gone up to 16 fookin euro :mad:

MadDog76

McCrack wrote: »

Yes, and many more will stop completely

You really are naive when it comes to smoking/smokers ........... nobody bases their decision to continue smoking (or to stop smoking) on the price of cigarettes!

etselbbuns

Jim Bob Scratcher wrote: »

30 grams of rolling tobacco gone up to 16 fookin euro :mad:

€14.50, caller

murpho999

Fr_Dougal wrote: »

For smokers it's much better value now to avoid short breaks in Ireland, pop over to Spain/Holland/Portugal for a weekend. Stock up on smokes, nicer surroundings and better value for accommodation/food etc. Every carton of 200 is a saving of ~€50.

Bizzare logic.

Foreign smokers will just bring their cigarettes with them.
Ireland actually is a nice place you know.

Jim Bob Scratcher

etselbbuns wrote: »

€14.50, caller

Amber leaf is gone up to 16

bilbot79

It's perfectly fine behaviour and not unscrupulous in any manner. The shopkeeper has taken a risk by investing in the old price cigs and is entitled to profit for that.

There is always the chance of them not being hiked and he would have no extra profit

aoh

It's the importer/manufacturer who pays the excise. Any retailer who increases the price the next day is just ripping off the customer. Bought 200 yesterday at pre-budget price. One honest and knowledgable company.

Annasopra

entropi wrote: »

This and any usual increase on tobacco or alcohol should and would only increase profits for the Government, not any private entity, once the increase comes into effect, right? Buying in bulk beforehand wouldn't make a difference, surely?

It does. Yes. You buy the goods at the pre tax increase price. And sell them at the new price immediately. Shops and pubs make a lot of money on it.

Annasopra

MadDog76 wrote: »

You really are naive when it comes to smoking/smokers ........... nobody bases their decision to continue smoking (or to stop smoking) on the price of cigarettes!

Nobody?

Pawwed Rig

murpho999 wrote: »

Bizzare logic.

Foreign smokers will just bring their cigarettes with them.
Ireland actually is a nice place you know.

I wonder what the duty free will be like post brexit. Theoretically you could book the cheapest flight to any UK destination and stock up on smokes each time. It would probably be worth the time investment.

Gmaximum

Pawwed Rig wrote: »

I wonder what the duty free will be like post brexit. Theoretically you could book the cheapest flight to any UK destination and stock up on smokes each time. It would probably be worth the time investment.

Quicker to cheaper to cross the boarder

Pawwed Rig

Gmaximum wrote: »

Quicker to cheaper to cross the boarder

Depends where you live and I'm not sure if facilities will be available at a land border.

dr.fuzzenstein

murpho999 wrote: »

Bizzare logic.

Foreign smokers will just bring their cigarettes with them.
Ireland actually is a nice place you know.

He's talking about Irish smokers.
The suggestion is not to take weekend breaks in Ireland, but jet off to Spain, etc on a cheap Ryanair flight. Once there, pop into a supermarket and buy as many smokes as will fit into your luggage and fly back again.
The argument is, cheap smokes, nice break in a nice country with nice food, win win all round. Except for the Irish hospitality industry that will lose a lot of domestic business.
It's what I used to do. Fly over to Germany, pop into Aldi and buy 20 to 40 pouches of rolling tobacco. Costs about €4 now for a pouch. If you are a moderate smoker and smoke one pack a week, your annual costs for smoking are around €200!
And the Irish exchequer doesn't get a single cent, which for me was the best part. And you get proper smokes, not that Chinese crap.

edit:
Not saying Ireland isn't a nice place. It is nice.
40g of halfzware rolling tobacco in Aldi costs €4.55.
http://www.discounter-preisvergleich.de/ALDI-Sued-Preisliste-Tabakwaren/#Tabakwaren

Avatar MIA

MadDog76 wrote: »

You really are naive when it comes to smoking/smokers ........... nobody bases their decision to continue smoking (or to stop smoking) on the price of cigarettes!

Using moving averages, overall smoking prevalence has
declined from 28.28% in June 2003 to 19.53% in December
2014 (21.55% males and 17.59% for females).

T

Avatar MIA

Sorry for the state of the above post, but the site where I copied it from caused havoc with the fonts etc.

It show's the reduction in the prevalence of smoking in Ireland. It's not as if everybody suddenly coped on to the health benefits of not smoking. These were all known in 2003. Cost is most certainly a factor. I'd say we all know someone that quit where cost was a factor/motivator.

McCrack

Avatar MIA wrote: »

Sorry for the state of the above post, but the site where I copied it from caused havoc with the fonts etc.

It show's the reduction in the prevalence of smoking in Ireland. It's not as if everybody suddenly coped on to the health benefits of not smoking. These were all known in 2003. Cost is most certainly a factor. I'd say we all know someone that quit where cost was a factor/motivator.

Dont be so naive!!!