Poland - proposed cigarette tax higher than tobacco companies expected..

September 8, 2010 - Tobacco companies are shocked at government proposals to raise tobacco duty by 7.5 percent in 2011, almost 6 percent more than originally expected.

Primary government consultations with tobacco representatives resulted in a duty hike amounting to 1.8 percent, from 146.83 zloty (36.93 euro, 47.05 USD) per 1000 cigarettes to 149.59 zloty (37.62 euro, 47.92 USD).

The outcry from tobacco concerns comes after cabinet proposals to raise duty on cigarettes by as much as 7.5 percent.

According to Krzysztof Kepinski, head of government relations at British American Tobacco, such a hike would raise the price of a packet of cigarettes by as much as 0.90 zloty (0.23 euro, 0.29 USD).

The increase in duty will also be bolstered by the planned 1 percent VAT hike. “Experience shows that too many hikes do not necessarily guarantee higher revenue,” Philip Morris Polska board member Michal Mierzejewski says, hinting that sales will not necessarily rise along with price hikes.

The Finance Ministry expects budget revenue from the tobacco hikes to amount to 220 million zloty (55.3 million euro) in 2011, a 4 percent increase on 2010. The ministry is also expecting a 2.5 percent increase in illegal tobacco trade.

However, the Finance Ministry has announced that exact cigarette prices for 2011 will not be set until 1 October 2010, as the duty will depend on the zloty-euro exchange rate on that date. (jb)

Reference: Tobacco companies hard hit by duty and VAT hikes, Source: Puls Biznesu, thenews.pl, 9/8/2010.

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