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Tax on cigarettes rises again

INCREASING excise taxes on tobacco products higher and earlier than originally planned is one of several measures by the Robert Fico government aimed at consolidating Slovakia’s public finances. On September 11, parliament adopted a draft revision to the law on the excise tax on tobacco products that raised the applicable rates, the SITA newswire wrote.

Smoking is getting more expensive in Slovakia.(Source: SME)

INCREASING excise taxes on tobacco products higher and earlier than originally planned is one of several measures by the Robert Fico government aimed at consolidating Slovakia’s public finances. On September 11, parliament adopted a draft revision to the law on the excise tax on tobacco products that raised the applicable rates, the SITA newswire wrote.

The Finance Ministry has calculated that the rises will have a negative impact on the families of smokers as the price per packet of cigarettes will increase by an average of €0.10.

The revision increases the specific component of the excise duty (which must not be less than 5 percent and not more than 76.5 percent of the amount of the total tax burden) on cigarettes from €58 per 1,000 cigarettes to €59.50 per 1,000 pieces (representing a 2.59-percent increase) and the minimum tax rate on cigarettes from €88.50 to €91 per 1,000 pieces (a 2.82-percent increase). It also increases the excise tax on cigars and cigarillos from €75.56 per 1,000 pieces to €77.37 per 1,000 pieces (a 2.4-percent increase). Moreover, it raises the excise tax on tobacco from €69.44 per kilogram to €71.11 per kilogram, representing a 2.4-percent increase.

The new legislation should bring additional budgetary income of €8.147 million in 2013, €8.514 million in 2014, €8.871 million in 2015 and €9.217 million in 2016. Its influence on budgetary income in 2012 is expected to be neutral.

Ivan Štefanec, a deputy for the Slovak Democratic and Christian Union (SDKÚ), considers the increase in excise taxes less damaging than in the case of direct taxes.

“In Slovakia we should not increase direct taxes; we should not increase payroll taxes, rather we should simplify this system,” said Štefanec, as quoted by SITA in June, adding that the most important aspects of the consolidation of the public finances were achievement of savings and reduction of expenditure.

The lowest excise taxes on cigarettes are now to be found in Lithuania, Poland and Latvia, Ľubomír Koršňák, an analyst with UniCredit Bank Slovakia wrote in a memo. Ireland, Great Britain, and France have the highest tax rates.

“Slovakia ranks among countries with a lower excise tax,” wrote Koršňák. “Even the October hike… will not change this fact.”

In general, the excise tax on cigarettes is lower among new EU member countries of central and Eastern Europe, which is to a great extent linked to the lower price levels in these countries.
“Out of the CEE countries Slovakia has the second highest excise tax on cigarettes,” wrote Koršňák, adding that after the October increase Slovakia will top the ranking in the region

Topic: Finances and Advisory


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