Higher cigarette prices to bring extra $28 mln

TIRANA, Dec. 8 – Starting from next January cigarette prices in Albania will increase by 20 lek (20 USD cents) per packet in a measure aimed at discouraging the country’s high smoking rate which will bring government an extra 28 million dollars for 2011. Under the changes approved in principle by majority members of the parliamentary economy committee this week, the excise tax on tobacco will further increase by 20 lek (20 US cents) per packet, climbing to 70 lek, up from 50 lek currently.
Opposition MPs accused government of intentionally not including the extra revenues from the increased tobacco excise tax in the 2011 budget, suspicious that the amount government will in fact collect is twice bigger than projections.
The draft law has been compiled in cooperation with the Health Ministry and is intended to bring tobacco excise taxes in line with regional and EU countries, considering that currently, a packet of cigarettes in Albania is quite cheaper than in EU countries.
The tobacco industry has told 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.
Earlier this year, the Business Consultative Council, a government advisory body on economic policies, also proposed some changes to the valued added tax (VAT) on health service and the threshold on VAT inclusion for small businesses.
The proposal to further lower VAT inclusion for businesses to 2 million lek (20,000 dollars) of annual turnover, down from 5 million lek currently, a measure which some associations have opposed as inapplicable, will also increase government revenues.
Meanwhile, VAT on health services will be cut to 10 percent.