Czech Republic - lower house of parliament approves tobacco tax increase in January 2012..

February 7, 2011 - Czech lawmakers approved a government proposal to raise taxes on cigarettes and tobacco products as of January 2012 to boost state budget revenue, the lower house of parliament said today on its website.

The Prague-based Finance Ministry, which drafted the law amendment required to comply with European Union legislation, estimates the higher taxes to bring about 2.4 billion koruna ($136 million) in additional state-budget revenue in 2012. The taxes should rise again in 2014 to bring them in line with EU laws, the ministry said in an e-mailed statement.

The higher taxes may help the government of Prime Minister Petr Necas narrow the fiscal deficit as it seeks to cut the shortfall to less than the EU’s limit of 3 percent of economic output by 2013, from an estimated 4.8 percent last year.

The amended law will raise the tax on cigarettes to 1.12 koruna (0.0631042 USD) apiece, from 1.07 koruna (0.0602862 USD), while the levy on cigars and cigarillos will increase to 1.25 koruna apiece, from 1.15 koruna (0.0704278 USD), according to the Finance Ministry. The tax on tobacco will increase to 1,400 koruna (78.88 USD) per kilogram (2.2 pounds) from 1,340 koruna (75.50 USD).

The amended tax law still needs to be approved by the upper house of parliament, or the Senate, and signed by President Vaclav Klaus. The lower house has the power to override eventual vetoes of the Senate and Klaus.

Reference: Czech Lawmakers Pass Higher Tobacco Taxes to Boost State Income by Peter Laca (placa@bloomberg.net) Editor responsible for this story: Willy Morris at wmorris@bloomberg.net, Bloomberg.com, 2/4/2011.

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