Cigarette prices to undergo new hike as excise duty raised

TIRANA, Oct. 7 – Cigarette prices are set to undergo another increase next year after government has announced a new hike as part of its initiative to curb smoking and smoking-related diseases as well as align the excise rate with the EU.
Although not officially announced, it is reported that the excise duty on 20-cigarette packs will increase by another 20 lek (Euro 0.14) starting next January, taking the excise rate to 110 lek (Euro 0.77) per packet.
“We believe the curb of the smoking rate will have a direct impact on improving health care and a social and economic impact. Excise rates on tobacco will gradually increase until 2017 to reach the minimum rate of excise duty in EU countries,” says Health Minister Ilir Beqaj.
Recent amendments to the law banning smoking in enclosed public spaces have considerably tightened penalties on violators and the enforcement of the law seems back on track after it was massively ignored since its entry into force in May 2007.
In January 2014, the excise rate on tobacco rose from 70 lek for a 20-cigarette pack to 90 lek with new increases projected in the next three years. The Finance Ministry had previously envisaged that 1,000 cigarettes (50 packs) would be taxed at 4,500 lek (Euro 31.6) in 2014, at 5,000 lek (Euro 35) in 2015, at 5,550 lek (Euro 38.6) in 2016 and at 6,000 lek (Euro 42) in 2017. Cigarette prices in Albania for the most popular brands vary from 200 lek to 270 lek (Euro 1.4 to 1.9) per packet.
Rising prices in the past few years have considerably curbed tobacco imports in Albania which meet around two-thirds of the country’s needs.
Tobacco imports in 2013 rose to around 3,700 tonnes, up 1.8 percent compared to 2012, and 13.7 percent compared to 2011, but were down by 18 percent compared to the peak level of 4,500 tonnes in 2010, according to customs authorities. The downward trend in tobacco imports in a country where around 40 percent of the population smokes unveils that either smuggling has increased or Albanians have shifted into domestic hand-rolled tobacco as prices of international brands have been on a constant rise.
The turnover of the cigarette market in Albania is estimated at Euro 300 million per year, of which 70 percent goes in excise, VAT and customs duties, says the Competition Authority whose probe earlier this year failed to find a banned deal among tobacco distributors.
Tobacco imports meet most of the country’s domestic demand. However, since 2008 when tobacco imports reached 4,391 tonnes, imports of cigarettes have been on a downward trend affected by higher prices and excise taxes. The share of imported cigarettes dropped to 64.8 percent in 2012 while the share of domestically produced tobacco rose to 35.2 percent, according to Open Data research centre.
Domestically produced tobacco has sharply dropped in the past 14 years, shows a study carried out by Open Data. Lack of domestic industry on cigarette manufacturing after the collapse of the communist regime in the early 1990s, failure of the agri-cultural policies and competition from imported cigarettes have led to a sharp decline of 3.7 times in the cultivation of tobacco during the 1998-2012, says Open Data research centre.