Motive for Uruguay tobacco tax rise questioned

Uruguayan storeowners believe that recent tobacco-product tax increases are aimed more at boosting government revenue than at reducing the number of smokers, according to a Latin American Herald Tribune story quoting the ‘trade association head’ Claudio Orrego.

President Tabare Vazquez signed on Friday an executive order increasing the tax to 52.22 pesos (US$1.68) on a pack of cigarettes, and to 23.26 pesos (US75 cents) on a pouch of tobacco.

With the higher rate, a pack of cigarettes that now sells for about 100 pesos (US$3.20), including tax, will cost nearly 15 pesos (US48 cents) more.

Orrego said the tax rise would increase demand for black market cigarettes, which sell for about 40 pesos (US$1.30) a pack.

“This is part of a campaign to increase revenues and the government is using the issue to punish us,” he said. “It doesn’t solve anything. It encourages the consumption of contraband tobacco, which does not comply with existing regulations and pays no tax.

“The smoker already has the habit. The smoker who needs to smoke … when he doesn’t have the money, ends up buying contraband cigarettes.”