THE Tobacco Institute of Hongkong yesterday accused the Government of being responsible for the loss of one-fifth of its market, as it braces for next week's budget. Outgoing institute chairman Mr Robert Fletcher said the Government ''clearly miscalculated the effect of its 100 per cent tax on tobacco and the effect it would have on smuggling''. ''We estimate that one billion sticks, or up to 20 per cent of all cigarettes sold in Hongkong, are smuggled in from other countries,'' he said. Mr Fletcher was diplomatic on whether the industry would be included in this year's round of price increases decreed by the Government. ''I will be very surprised if we are hit heavily again,'' he said. ''If we are, I will be very disappointed if it is more than the rate of inflation.'' Mr Fletcher said the impact of the punitive 200 per cent duty increase of 1991 was still being felt, even though it was eventually halved. The large illegal market in Hongkong was a direct consequence of that ''ill advised'' policy. The industry took exception also to last year's consultation paper that proposed an almost total ban on tobacco advertising. It regarded the proposal as unwarranted interference by the Government. Two years ago, the then financial secretary, Sir Piers Jacobs, imposed a 200 per cent increase on tobacco duties to boost the Government's anti-smoking stance. The price of a packet of cigarettes doubled overnight from $12 to $24 and sales fell by more than 70 per cent in the first week. The tax increase led to a propaganda war and the Government bowed to pressure two months later and cut the rise to 100 per cent.