BUSINESS

Cigarette tax hikes having opposite effect

ILIAS BELLOS

TAGS: Taxation

Every year the Greek state misses out on tax revenues of at least 800 million euros due to the tax hikes it has imposed on cigarettes. With the new increases scheduled from 2017, it runs the risk of missing out on even more much-needed cash, as the shock of the hikes is likely to lead to a massive swing towards illegal tobacco products.

From budget revenues of 3.9 billion euros in 2011 (3 billion from the special consumption tax and 900 million from the value-added tax), state coffers cashed in on just 3.1 billion last year (2.4 billion from the special tax and 700 million from VAT), with projections for this year pointing to an even bigger contraction.

The drop is not due to people giving up smoking, however, as the market share of illegal tobacco products has doubled from 10.1 percent in 2011 to 20 percent this year, and is expected to grow to 25 percent in 2017 after the upcoming rise in tobacco tax.

The increase in retail prices is anticipated to come to 40-50 cents per pack as a result of the increase of the taxes’ share of the average retail price to 90 percent, which is by far the highest in the European Union, making the Greek tobacco tax policy an example to avoid in the future.
 

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