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TOKYO — Japan, long known for its smoker-friendly policies, is debating a substantial tax increase that could bring Tokyo in line with the U.S. and Europe.

The ruling Liberal Democratic Party’s annual tax commission is expected to review a proposal by key lawmakers that could more than triple the retail price of a pack of cigarettes to about $10.

The backers of the higher tax are looking at the additional revenue as a way to cut Japan’s ballooning budget deficit without taking the deeply unpopular move of raising its consumption tax.

Japan Tobacco Inc., which has a virtual monopoly on cigarettes here and is 50% owned by the government, argues that more-expensive cigarettes would depress sales and lead to lower tax revenue. The company, the world’s third-largest tobacco maker by volume after Altria Group Inc. and British American Tobacco PLC, on Tuesday sent executives to lobby the LDP against an increase.

"The government can’t hope for increased tax revenue, because such a big raise in the tax would mean consumption plummets," JT Deputy President Ryoichi Yamada said afterwards. "It’s unfair that smokers should have to bear the burden" of poor government finances.

Japan needs to boost government revenue to pay for pensions for its rapidly aging population. Government debt was 849 trillion yen ($8 trillion) at the end of March, equal to more than 160% of the country’s gross domestic product. One measure put forward to meet the shortfall is raising the 5% consumption tax. But consumers are sure to oppose that, and Prime Minister Yasuo Fukuda, already suffering from low approval ratings, has been reluctant to push the idea.

Many in Japan’s ruling party see higher tobacco tax as a promising alternative. In mid-June, about 45 lawmakers formed a bipartisan league to argue the case for higher taxes. One of its main advocates is LDP heavyweight Hidenao Nakagawa, former chief cabinet secretary and an opponent of raising the consumption tax.

The price of a cigarette pack in Japan is among the lowest in the industrialized world. On average, a pack costs about 300 yen, of which roughly 60% is tax. That is less than half of what a pack costs in New York and less than a third of what it costs in the United Kingdom.

These lawmakers argue that raising the cigarette tax would boost Japan’s tax revenue from the product, which was around 2.2 trillion yen for the year ended March 2008. If cigarette consumption remains unchanged, charging 1,000 yen a pack would increase cigarette-tax revenue by 8.5 trillion yen a year, according to Barclays Capital. But surveys show that as many as three-quarters of smokers say they would try to quit if cigarettes cost 1,000 yen a pack, though it’s unclear how many would succeed.

Health proponents, including the country’s physicians and Health Ministry, say an increase in cigarette taxes would cut down on health-care costs. Japan has one of the highest smoking rates in the industrialized world, at around 40% for men and 10% for women. Lung cancer is a leading killer among men.

BELGIUM – Sales in cigarettes were down by 12 percent or 750 million cigarettes during the first half of 2008.
This is the first significant drop in cigarettes sales in Belgium.
There has also been a decrease in tobacco sales. Nearly 3,400 tonnes of tobacco were sold during the first six months of 2008. Tobacco sales are down 8.5 percent in comparison with 2007.
This is good news for Belgians’ health but bad news for the treasury as they will lose out on VAT and duty worth EUR 35 million.
The Health Ministry identifies several factors that triggered the fall in sales: legislation banning smoking in restaurants and public places and 2007’s price rise.
Belgian cigarette sellers are also feeling the competition from Eastern European producers. Cigarettes are far cheaper in Eastern Europe and are routinely smuggled to Belgium.