Germany - tobacco tax to increase incrementally over next 5-years..

Germany - coat-of-arms..
October 27, 2010 - German Chancellor Angela Merkel’s government plans to raise tobacco taxes over the next five years, generating as much as 1 billion euros ($1.4 billion) in fresh revenue for the federal budget by 2015. Beginning next year, the government will raise a predicted 200 million euros through the tax, rising to 1 billion by 2015.

The tax on cigarettes, rolling and pipe tobacco would be levied from 2011 and make up for falling tobacco tax revenue as Germans smoke less, opt for cheaper brands or turn to smuggled products, the Finance Ministry said today in an e-mailed statement.

Merkel’s coalition, seeking to shrink the budget deficit with about 80 billion euros of cuts and revenue-raising measures, agreed late yesterday to water down planned cuts to energy subsidies for companies with the difference in part to be made up with the tobacco-tax increase. That prompted opposition criticism Merkel is shifting the tax burden from companies to taxpayers.

The tobacco-tax increase will take place incrementally from 2011 to prevent smokers from rushing to cheaper brands, the Finance Ministry said. It will also raise the levy on less-taxed products faster to avoid price distortions. A pack of 19 cigarettes will be taxed 4-8 cents more per year, while a 40 gram (1.4 ounces) pack of loose tobacco will be levied 12-14 cents a year.

“This is completely the wrong direction to take, both economically and ecologically,” Alexander Bonde, the opposition Greens’ budget spokesman in parliament, said on MDR Info. “The government has given up its plans under lobby pressure.”

Finance Minister Wolfgang Schaeuble had planned to recoup 1.5 billion euros annually from cutting subsidies for energy-intensive companies such as the chemicals industry, prompting the BDI industry lobby to warn that as many as 870,000 jobs were at risk. Schaeuble will instead raise about 500 million euros from the energy tax next year, Bild newspaper reported today. Germany’s VCI chemical-industry association welcomed the government decision as a return to “economic sanity,” according to an e-mailed statement.

1.00 EUR = 1.37840 USD

Reference: Germany to Raise Taxes on Tobacco, Cut Energy Subsidies Less Than Planned by Patrick Donahue (,, 10/25/2010.

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