Illegal tobacco trade costing state 730 million euros

Any efforts to further raise taxes on tobacco products will lead to additional losses in public revenues and will strengthen the illegal tobacco trade, the Foundation for Economic and Industrial Research (IOBE) warned on Thursday.

In a report presented during a meeting on tobacco taxation hosted by IOBE in Athens, the foundation said that the illegal trade in tobacco will cost the state as much as 730 million euros by end-2014. It also estimated that there will be a shortfall of at least 148 million euros in this year’s state budget from legal tobacco sales.

“Taxation on tobacco products has reached or even exceeded its limits. Efforts to raise it further will lead to a reduction in public revenues and the expansion of the illegal trade,” IOBE’s director general, Nikos Vettas, warned.

“There is also a risk that the situation will become irreversible,” he added.

According to figures presented by IOBE, tobacco sales in Greece have dropped in the 2009-2013 period by 36 percent in terms of volume and 52 percent in value. The illegal trade in bootleg cigarettes and loose-leaf tobacco, meanwhile, has grown from 5 percent of total tobacco sales in 2009 to 22 percent today, believed to be in direct consequence of the increase by 10 percentage points of the special consumption tax levied through tobacco products over the same period.

“We do not want to experience the sudden death we suffered at the end of 2012, when a sudden increase in the special consumption tax was introduced and we had to pay 20 million euros retroactively,” a representative of the tobacco industry told Kathimerini on the condition of anonymity.

Representatives of British American Tobacco, Imperial Tobacco and Japan Tobacco, who together represent 50 percent of the domestic market, told Kathimerini on the sidelines of the event that they are not considering exiting the Greek market despite the drop in sales.

“If we were to leave, we would have done so two years ago,” they said. “Now we are seeing an improvement in the climate and we hope that there will be no unpleasant surprises on the taxation front in the future.”

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