TIRANA, Sept.13- The price spike in Albania is felt more heavily when it comes to alcohol and tobacco. Data from the National Institute of statistics reveal that annual inflation for these products has resulted in a price increase of 14.3 percent since June of 2007. The rise has been consistent since June of last year.
Excise tax effect
One of the main reasons why the price has inflated for these products in Albania has been the considerable increase in the excise tax. The government decisions to keep increasing the tax rate on the products have translated into direct price increases. In September of 2006 the tax on cigarettes was increased by 15 lek per pack for a total amount of 40 lek per pack. The Ministry of Finance has justified the decision by mentioning that the increase is in line with the similar experience of countries in the region. The same has applied to the alcohol, taxes on which have been increasing in the last few years. The new fiscal package for the second half of this year predicts additional significant increases in the tax. Tax on wine has risen by 30 leks per liter, while increases have been noticed for beer as well. Given the immediate translation of higher taxes into higher prices, the effect has been harder on consumers than on producers. Sometimes the price spike has been even higher than the corresponding increase in tax.
Comparative examples
According to data collected by BoA about the price changes for these products in Albania and neighboring Greece and Italy, the price change for this year has been significantly higher in Albania. While the June 2007 inflation rate for alcohol and tobacco is 14.3 percent, in Greece it is only 6.7 percent and in Italy is three times lower than in Albania.
Cigarette taxes will keep on rising
According to projections presented in 2006, the excise tax on cigarettes will continue rising from a level of 20 euro/kg in 2007, to 30 euro/kg for 2009. This will raise the tax per pack which will go from 39 leks in 2006, to 73 lek롩n 2009. Finance Minister Ridvan Bode has explained that despite the increased taxes, cigarettes in Albania are among the lowest in Europe and that countries in the region are adapting to European standards so Albania has to follow along.
