Government officials say the ultimate target is to get the price of cigarettes up to the EU level. Tobacco companies say a sharp tax increase will lead to smuggling, tax evasion.
TIRANA TIMES
TIRANA, Sept. 15 – Albania’s government says it is trying to kill two birds with one stone as it proposes to drastically increase excise taxes on cigarettes. It wants to increase revenue from tobacco products and lower the country’s high smoking rate.
The Finance Ministry is readying a document for approval by the government that would see the excise tax increased by 40 percent to Lek 70 per cigarette pack, after the 2009 increase that set the tax to Lek 40 per pack. The Lek 30 increase would be scheduled to kick in January 1, 2011.
The move comes in coordination with the Health Ministry campaign to fight smoking, which includes advertising campaigns, warning labels and the promotion of higher prices to deter smokers.
Government officials say the ultimate target is to get the price of cigarettes up to the EU level. But right now, Albania’s taxes on cigarettes are far lower that those in Western Europe.
Government statistics show about 870,000 Albanians smoke, which according to health officials is an alarming rate.
But excise taxes – which are usually levied on things like booze, cigarettes and coffee – make up a good revenue source for the government, which report it made Lek 5.2 billion in excise taxes last year, with Lek 1.9 billion coming from cigarettes alone.
Now, amendments to Excise Taxes Law No. 8976 mean there will be an increase in the level of excise taxes charged to certain products, among which, a considerable increase will be seen in tobacco products.
The changes mean the price on a pack of cigarettes will have another 20 leks added to it, increasing market prices by at least that amount.
The problem is that when excise taxes go up, so do the instances of cigarette smuggling, and the tobacco industry says it is worried the new taxes would force legitimate companies to fold and illegal operations to thrive.
The tobacco industry has told the government that there are pitfalls that can come from a drastic price increase, creating a lose-lose situation for all — the companies, the government and the customers.
Tobacco makers say the new government policy will lead to more illegal tobacco trade. They say smokers with low income will turn to cheap cigarettes of bad quality that are smuggled in and on which no taxes have been paid.
Faced with the situation, the tobacco industry representatives have proposed the government follow a different plan, which they say will help not only increase government revenue but also allow for a stable market. They want the increases to be made in smaller increments over longer periods of time.
The tobacco companies say the government’s decision to apply an excise tax policy that is specific to tobacco products, coupled with the gradual increase and better implementation of the law by customs authorities would lead to higher state revenues and a reduction in illegal cigarettes on Albanians’ hands.
