Simulating the impact of a fee scheme to regulate tobacco sales on retailers profits: a case study from Scotland

Introduction Requiring fees for retailers to sell tobacco is a promising avenue for regulating the availability of tobacco products. However, there is a need to understand the financial impact of fees on retailers, including the likely effectiveness of fees in discouraging tobacco sales. This study modelled the impact of different fee schemes on retailers’ profits in Scotland and examined whether these effects differed by neighbourhood characteristics. Material and Methods We gathered data on all tobacco transactions in four weeks of each year from 2019 to 2021 in 192 small retailers across Scotland. We estimated annual tobacco gross profits (i.e. tobacco sales price minus cost price) among retailers and the percent of profit loss that would result from the implementation of three fee schemes: 1) universal fees (flat fee for all retailers), 2) volumetric fees (fee proportional to sales volume), and 3) urban/rural fees (distinct flat fee for urban/rural retailers). We assessed differences in percent profit loss by urban (vs rural) and area deprivation. Results The mean annual gross profit from tobacco among small retailers was £15,108. Retailers in the most deprived and urban areas had 67.9% and 122.8% higher profits than those in least deprived and rural areas. Universal flat fees resulted in greater percent of profit loss among retailers in the least deprived (OR: 2.7 [1.1-6.8]) and rural (OR: 5.5 [2.0-17.0]) areas as compared to the median. Urban/rural fees concluded higher percent of profit loss among retailers in least deprived areas (OR: 4.4 [1.8-11.5]). With volumetric fees, we observed no differences in retailers’ percent of profits loss. Conclusions Introduction of retailer fees offers new opportunities to reduce the availability of tobacco products in Scotland. However, there are significant differences between fee structures. Policymakers should consider geographical differences in retailers’ tobacco profits to design equitable fee structures to regulate tobacco sales.