Price war is seen as having encouraged more to take up habit The government will probably increase the tax on tobacco products in next week's budget to show its determination to combat smoking. A source close to the government said a rise in the tax was necessary as the price of cigarettes had dropped substantially amid a price war in the past few months. Some budget brands now cost only $21 a pack. He said the price war may have encouraged more young people to smoke, and the government might have to address the problem by increasing the tax. The government now gets $16 from the sale of a standard-price pack of cigarettes. 'It has been five years since the government last raised the tobacco tax. In fact, cigarette prices in Hong Kong are not high at all when compared to countries in Europe or other developed countries. We have to demonstrate our commitment to the anti-smoking policy,' the source said. 'There were also worries in the past that an increase in the tobacco tax would worsen cigarette smuggling, but this is not the case now. The situation has improved significantly in the past year.' According to the Customs and Excise Department, the number of illicit cigarettes seized last year fell by 40 per cent compared with 2004, from 167 million sticks to 100 million. The department also recorded an increase in cases and arrests. There were 51,696 cases last year, in which 5,895 people were arrested. Cheung Kwok-fu, head of customs' revenue and general investigation bureau, said the demand for illegal cigarettes had dropped since tobacco companies lowered prices and because of a tougher crackdown by the department. He believed increasing the tobacco tax, which could push prices back up, would have only a limited effect on the illegal trade as there were many factors at work. 'If you look back on recent years, officers have focused their strength on the retail level and arrested both the buyers and sellers,' Mr Cheung said. 'It has a strong deterrent effect and people nowadays will not risk being arrested just to save a couple of dollars.' A tobacco industry source said the sector was expecting a small rise in the tobacco tax. 'We understand there is a strong possibility of a tax increase,' he said. 'But we think the ban on smoking in bars and restaurants will have an even bigger impact on the industry.' Council on Smoking and Health chairman Homer Tso Wei-kwok said he would welcome an increase in the tobacco tax. He said it would help reduce the number of young people taking up the habit, and would, in the long term, lower the smoking population. 'We believe we should use high prices to deter smoking, especially among young people. When they are not that financially independent, this will help,' Dr Tso said.