The increase in the special consumption tax on tobacco products from January 1 will entail a 100-million-euro annual loss in state revenues, a report issued by the Foundation for Economic and Industrial Research (IOBE) warned on Monday.
According to the report, the tax hike will bolster tobacco smuggling unless more effective measures to reduce it are implemented. It estimated that the illegal trade will grow by more than 5 percentage points, meaning that contraband cigarettes will account for 30 percent of all cigarette consumption.
IOBE believes that the new rise in taxation will lead to a significant increase in retail prices (by 40 to 50 cents per pack of 20 cigarettes and by 50 cents per pack of fine-cut tobacco) and a major decline in the consumption of legal tobacco products, meaning the hike will not have the desired result in the country’s fiscal figures.
The Finance Ministry is increasing the special consumption tax on cigarettes from 20 percent to 26 percent from January, and on fine-cut tobacco from 156.7 euros per taxable unit to 170 euros. This increase is aimed at the collection of 121.8 million euros in additional tax revenues on an annual basis.