Speculation blamed on higher cigarette prices

TIRANA, Oct. 21 – Two months before a new hike in tobacco excise rate enters into force, cigarette prices in Albania have undergone the usual price increase ahead of such news while no measures have been taken to curb the speculation expected to bring tobacco importers and traders huge profits. Prices on most popular cigarette brands have already increased by 20 to 30 lek per packed (Euro 0.14 to Euro 0.21) abusively preceding the expected price increase starting January 2014. One major tobacco importer has already hurried to fulfil its legal obligation of announcing its maximum retail sale prices on the media, starting Oct. 30, two months before the new excise rate enters into force. Other importers and distributors have not yet announced the new prices but the increase is evident on the market.
Some local traders who are supplied by exclusive distributors blame the price increase on speculation by wholesale points as they continue offering unchanged prices for several major brands.
The change in the excise rate is also expected to significantly increase tobacco imports in the next couple of months. In December 2013, when government announced plans to increase the excise rate on tobacco by another 20 lek (Euro 0.14) for a 20-cigarette pack, imports rose by 32 percent to 567 tonnes compared to the previous month and more than doubled compared to the average monthly imports in 2013.
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. The Finance Ministry says that under the EU directive the minimum excise rate on cigarettes should be at 57 percent of the retail prices, compared to the current 34 percent in Albania.
“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.
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 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.
Cigarette prices in Albania for the most popular brands vary from 180 lek to 270 lek (Euro 1.9) per packet.
With a smoking rate of around 40 percent, one of Europe’s highest, Albanians are estimated to spend more than 300 million euros on tobacco products every year.