European tobacco makers await higher excise taxes

The tobacco industry expects that excise tax on tobacco products will go up by 7% next year in order to comply with EU rules, Tobacco Industry Association president András Patai told a Thursday press conference.

The excise tax will be raised in September by 2.8%, following an identical increase in April. As a result, the tax on 1,000 cigarettes will rise to the EU-specified €64 by 2008.

Excise tax on tobacco generated Ft 223 billion for the budget last year, and an additional Ft 67 billion in VAT, which together account for 2% of all budget revenues, Patai said. Contraband cigarettes fell from 17% of all sales in 2005 to 14% in 2006 as the companies lowered prices amid rising taxes to compete for consumers, he said. The black market cost the budget an estimated Ft 150 billion in 2004 and 2005.

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