Category: Taxation

U.K.: ‘Biggest Tobacco Tax Hike in History’

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U.K. Chancellor Jeremy Hunt is planning the biggest tobacco tax hike in history, according to the Daily Mail.
A pack of 20 cigarettes will reportedly jump by £1.15 ($1.81), which is an increase of more than 15 percent.
Although cigarette duty usually rises with inflation, some smokers had hoped the Chancellor would put a hold on a jump because of such high levels of inflation.
Tobacco taxes raise almost £11 billion in taxes for the government, representing 1.2 percent of all tax revenue.
The U.K. hopes to reduce the share of smokers in its population to fewer than 5 percent by the end of the decade.
Earlier this year, a poll found a majority of Brits want an immediate ban on cigarette sales.
The findings could fuel the belief of some lawmakers and health experts that public opinion is approaching a “tipping point,” similar to when the U.K. ban on smoking in pubs, bars and restaurants was introduced in 2006 and 2007.
February 22, 2023
Cigarette Prices to Double in Pakistan

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Tobacco companies in Pakistan announced an increase in cigarettes prices of 250 percent per pack following the implementation of the government’s PKR170 billion ($649.190 billion) minibudget this week, reports Propakistani.
The budget includes a sales tax increase from 16 percent to 17 percent and a 150 percent increase in the federal excise duty (FED) on cigarettes.
The retail prices of all popular cigarette brands including Marlboro, Gold Leaf, Capstan and Gold Flake, have gone up with the cheapest retailing at PKR211 to the most expensive now on sale for PKR522-525 per pack.
Public health advocates applauded the price hikes, saying that price measures are the most effective way of discouraging tobacco consumption.
Critics say the recent FED threaten legal tobacco companies’ survival because their sales are declining. Others note that the tobacco industry has raised prices above what was required by tax changes.
The industry, they say, has widened the per-packet price differentials by raising consumer rates significantly above the cost of the tax increase on more expensive products and absorbing the tax impact on cheaper products.
February 22, 2023
Singapore Tobacco Excise Duty to Increase

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Singapore’s government is raising the excise duty on all tobacco products by 15 percent, effective Feb. 14, 2023, according to Channel News Asia. The move is aimed at discouraging consumption, according to Finance Minister Lawrence Wong’s budget speech.
The increase is expected to generate about $100 million in additional annual revenue, according to Wong.
The tobacco tax was last raised in Singapore in 2018 when it increased by 10 percent.
February 14, 2023
A Blunt Tool

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Unless properly structured, Europe’s tobacco and vapor tax plans may not achieve their public health objectives.
By Stefanie Rossel
The European Commission’s (EC) December 2022 proposal for an update to the 2011 EU tobacco excise directive came with a first: In addition to a significant hike in cigarette excise rates, the draft also calls for a bloc-wide vaping levy.
According to the proposal, the current minimum EU excise tax rate of €1.80 ($1.92) should increase to €3.60 per pack of 20 cigarettes. This would double excise duties in member states with low cigarette taxes (in eastern European countries, a pack of cigarettes can currently sell for under €3) and affect excise duties in countries such as Luxembourg and Austria, where cigarette prices are low relative to income. The EU hopes to generate an additional €9.3 billion in revenue from the tax harmonization, which would be a welcome windfall for pandemic-struck and inflation-struck member states. If enacted, the proposal would also increase taxes on hand-rolled tobacco.
E-cigarettes with less than 15 mg of nicotine per milliliter of liquid would attract a 20 percent excise duty, and stronger products would be subject to a duty of at least 40 percent. In the EU, nicotine content of e-liquids is limited to 20 mg per milliliter. According to the draft proposal, heated-tobacco products (HTPs) would attract a 55 percent excise duty, or a tax of €91 per 1,000 items sold.
The proposed legislation would harmonize the fragmented EU vapor market, where each member state taxes vapor and HTP products at its own rates. It is part of a push aimed at accelerating the reduction of smoking rates throughout the EU. As part of the common market’s Beating Cancer Plan, introduced by the EC in February 2021, health officials seek to lower the current EU smoking prevalence of 26 percent to 20 percent by 2025 and achieve a “tobacco-free generation”—that is, a smoking rate of below 5 percent—by 2040.
The draft was released only weeks after the EC imposed a ban on flavored HTPs to cut the growth in demand among younger consumers. Responses were mixed. While some argued that union-wide taxes are necessary because less harmful products still present risk, tobacco harm reduction advocates warned for unintended consequences.
Too High, Too Complex
David Sweanor
“Simply increasing cigarette taxes is a blunt instrument when trying to reduce the health toll from cigarette smoking,” says David Sweanor, adjunct professor of law at the University of Ottawa in Canada. “It is far more powerful than other standard anti-smoking measures but has limitations and constraints that are often overlooked. Price sensitivity is real, but many people who smoke cigarettes will seek to deal with increased costs through access to contraband, the cross-border trade, simply changing the way they smoke without achieving health improvements, or further diminishing their overall well-being by redirecting expenditures from healthier purchases to the purchase of cigarettes.”
Taxing low-risk alternatives reduces the incentive to switch from cigarettes and can make illicit cigarettes more competitive, according to Sweanor. In his view, it is akin to making alcoholics who give up drinking by taking up jogging pay a tax on running shoes. “It misses the point of how taxes can be justified due to the relative health impact of certain behaviors,” he says.
Dustin Dahlmann
Dustin Dahlmann, president of the Independent European Vape Alliance, believes that EU policy should be guided by scientific evidence. “Science around the world agrees that vaping is significantly less harmful than smoking,” he says. “E-cigarette taxes that are too high [to] prevent socially disadvantaged groups in particular from switching to e-cigarettes. In the first instance, there should not be excise duties for electronic cigarettes, as they are a means for smokers to switch to less harmful alternatives. If further harmonization of excise duties is considered, legislators should take into account the significant differences in risk profile between tobacco cigarettes and electronic cigarettes and apply the excise duties methodology accordingly, i.e., proportionality to the harm reduction benefits brought about by tobacco replacement products.”
In practice, this would mean a maximum excise duty of €1 per 10 mL or €0.10 per 1 mL of e-liquid, and it should be applied only to e-liquids with nicotine, according to Dahlmann. “The EU draft imposes a combination of an ad valorem and a specific volume base excise that would be an administrative burden for small and medium enterprises and fiscal authorities due to the additional complexity. Giving two options will lead to uncertainty, defeating the purpose of a harmonization of excise rates.”
Illicit Trade Could Increase
The question about how the EU’s revised tobacco tax directive would impact the illicit cigarette market is justified. The experience of France provides a cautionary tale. Following a tax increase of almost three times the EC’s minimum level, the illicit market in that country more than doubled, from 13.7 percent in 2017 to 29.4 percent in 2021, leading to an estimated loss of €6.2 billion in tax revenues in 2021, according to a KPMG report. In general, the study found, illicit consumption in the EU increased by 3.9 percent, or 1.3 billion cigarettes, in 2021, which corresponds to a loss of €10.4 billion in taxes.
How the suggested excise duty increase would impact markets with relatively low income and high smoking levels, such as Greece (42 percent smoking prevalence) and Bulgaria (38 percent), is anybody’s guess. “I have worked globally on illicit trade issues for decades,” says Sweanor. “There is much we can do to limit the trade, but the economics makes [illicit cigarette trade] so lucrative that it is hard to imagine bringing it under control so long as there remains a significant market for cigarettes. Markets meet needs, including illicitly. Cigarettes are extraordinarily inexpensive to make, and taxes and the huge profit margins of Big Tobacco create a business opportunity many people can be expected to see as a money spinner. The real answer is to facilitate disruptive technology that makes cigarettes as undesirable to consumers as unsanitary food or leaded petrol.”
To achieve the latter, the EC would have to acknowledge the harm reduction and smoking cessation potential of novel tobacco products. In February 2022, the EU Parliament became the world’s first elected chamber to endorse THR when it adopted a resolution on cancer prevention and treatment that notes that e-cigarettes “could allow some smokers to progressively quit smoking.” Dahlmann praised the move as a “landmark declaration” that would help reassure smokers of the benefits of switching to vaping. “All other EU institutions—and in particular the European Commission—should take this on board and ensure that policy follows science, not the other way around,” he said at the time.
Sweanor is less upbeat. “The taxation of low-risk products reflects an understanding of differential risks. But it fails to come to terms with the full magnitude of the harm from cigarette smoking and the enormous potential to dramatically reduce it. When we are looking at hundreds of thousands of annual deaths, surely it is a public health emergency—and policies should reflect that. Language such as “could allow some smokers…” and policies that limit the relative acceptability of low-risk alternatives indicate that the extent of the public health opportunity is not fully grasped.”
Differentiated Approach Required
Whether the EU is prepared to part ways with anti-novel nicotine product sentiment of the World Health Organization Framework Convention on Tobacco Control (FCTC), which the common market has ratified, remains to be seen.
“The EU is obligated to support tobacco harm reduction as a signatory to the WHO’s FCTC as stipulated in the introduction, article 1 (d) of the treaty,” says Dahlmann. “The FCTC requires the EU to not only allow reduced-risk products but to actively promote them. However, this definition is not actively supported by the WHO. The rule here is much more ‘quit or die.’”
“The WHO’s FCTC process has followed in the footsteps of narcotics protocols in being hijacked by ideologues who seek an abstinence-only approach on drugs where total abstinence is simply not a viable nor a humane goal,” Sweanor adds. “As with those narcotics protocols, caring governments that follow the Enlightenment principles of science, reason and humanism will either creatively skirt such guidelines or simply ignore them. This is something we are now seeing unfolding globally with cannabis policies.”
The goal of the new tax directive to create a smoke-free European society, he says, is noble and achievable—and far more quickly than envisioned in that 2040 goal. “But it requires bold rather than tentative steps. Policymakers should act in ways consistent with cigarette smoking being a public health crisis of enormous importance,” says Sweanor. “The best way to tackle this is by use of cross-elasticities, of empowering and facilitating people who smoke cigarettes to make healthier choices. This is accomplished by measures such as the widest possible cost differential between lethal cigarettes and low-risk alternatives. Given the horrendous death and disease tool from cigarettes, this should be a huge priority.”
“E-cigarettes need to remain accessible and affordable to smokers from all socioeconomic backgrounds who wish to quit smoking,” says Dahlmann. “E-cigarettes offer smokers an alternative that is 95 percent less harmful than smoking. Switching from tobacco to vapor has positive individual, social and economic implications and should be encouraged, not penalized by the tax system. If taxes make vaping more expensive than smoking, many smokers will lose an incentive to switch to the much less harmful alternative. We therefore would see no chance of achieving the EU’s ambitious goals.”
Before it is enshrined in law, the proposal will have to be agreed on by all EU member states. BAT already noted that this is merely the beginning of a long legislative process. “I assume there will be amendments, but we do not yet know their likely nature,” says Sweanor. “The proposal could be changed to help facilitate a rapid public health breakthrough as people abandon lethal cigarettes in huge numbers. Or it could be amended to make that a pipe dream.”
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

February 1, 2023
Kenya Proposes Higher Tobacco Stamp Duties

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The Kenya Revenue Authority (KRA) wants to increase the stamp duty on combustible cigarettes, electronic cigarettes and other nicotine-delivery devices to KES5 ($0.04) from KES2.8, reports The Star.
The agency has invited the public to give its views on the proposal by Feb. 3.
The move to appears to be in response to President William Ruto’s directive to the KRA to double its revenue collection from KES2.1 trillion to more than KES4 trillion.
Last November, the president said increasing revenue collection would help the country ease its debt burden.
“I need help with our debt situation. I have agreed with KRA that as a country, we must move from KES2.1 trillion to between KES4 [trillion to KES]5 trillion,” he said.
According to Ruto, countries in the middle-income category typically raise 20 percent to 25 percent of their GDP from taxes. By comparison, Kenya raises only 14 percent of its GDP in that manner.
January 17, 2023
Montenegro Raises Cigarette Duty

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Montenegro increased the excise duty on cigarettes, tobacco and e-cigarettes effective Jan. 1, according to SeeNews.
Duty increased from €44 ($46.71) per 1,000 cigarettes to €47.50 per 1,000 cigarettes. Cut tobacco duty increased to €55 from €50, and smokeless tobacco duty increased to €145 from €100.
January 4, 2023
Sri Lanka Increases Tobacco Duty

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The government of Sri Lanka increased the excise duty on alcohol and cigarettes by 20 percent, according to the Xinhua News Agency.
State Minister of Finance Ranjith Siyambalapitiya said the duty was raised to increase state revenue and discourage alcohol and cigarette consumption. In 2021, Sri Lanka collected LKR249.6 billion ($687 million) in taxes from alcohol and tobacco products, according to Siyambalapitiya.
January 4, 2023
Serbia: Cigarette Prices Increasing

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The price of all types of cigarettes in Serbia will increase by RSD10 ($0.09) per pack, effective Jan. 1, according to Serbianmonitor.com.
Cigarette prices have increased twice a year since the excise duty schedule was adopted in 2020. Prices will continue to increase until 2025 with the goal to align Serbia with EU standards.
Excise duty for e-liquid is increasing by RSD1 per milliliter, and the price of nonburning tobacco will also increase.
January 3, 2023
Ireland: Tobacco Companies Pay for Cleanup

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Effective Jan. 1, tobacco companies will have to pay part of Ireland’s multimillion-euro street cleaning bills under new legislation driven by EU moves to cut plastic waste, reports The Irish Times.
Cigarette butts account for half of all litter and are “the biggest litter scourge,” according to the National Litter Pollution Monitoring System.
Beginning this year, tobacco companies will be liable in arrears for part of the costs. The full liability amount will not be set until data is collected on the contribution of cigarette butts to the 2023 litter toll.
A statutory company overseen by the Department of the Environment will be established to ensure that producers are contributing to the cost or redesigning their products to abide by the Brussels directive.
The legislation will later focus on fishing gear, balloons and wet wipes. The change makes producers responsible for the entire life cycle of products, including end-of-use costs.
“It forces companies to rethink what they’re putting on the market and the costs involved—if they have to pay for litter clean-ups, if they have to pay for recycling,” said Bernie Kiely, a senior environment official in circular economy materials management. “What you are doing is putting that whole-of-life cost back on the producers who put it on the market in the first place.”
January 3, 2023
Experts Call for Simplified Tobacco Tax

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Tobacco taxation experts have recommended the government of Vietnam simplify the country’s excise tax structure on tobacco, reports EIN News. The move would facilitate tax administration, reduce opportunities for tax avoidance and evasion, increase the government’s revenues and have a greater impact on reducing tobacco use.
The recommendation comes after the Vietnam government approved a tax reform strategy for up to 2030, which sets the process for switching from an ad valorem tax system to a hybrid tax system for tobacco and other products subject to excise tax.
A number of experts suggest that a hybrid tax system that includes ad valorem and specific taxes is the most simple and effective system. In a recent report titled “Study on the Special Consumption Tax System,” PwC Vietnam called it “The right direction in line with the general trend in the world.”
According to the report, the government has lost revenues due to tobacco smuggling, especially in 2016–2017.
The total tax loss due to smuggled tobacco consumption has reached nearly 9 percent of tobacco tax collection, and tax collection of tobacco remained unchanged in the 2006–2020 period without factoring in inflation, the report said.
Based on the analysis of the current excise tax policy, the objectives of the government and tax policies in comparable countries, it outlined a number of options for SCT reform along with roadmaps for the short-term and the long-term.
The first option is transitioning into a hybrid tax system then gradually increasing the specific component and decreasing the ad valorem component at an appropriate time in future, considering to move to a single-tier specific tax system when being suitable.
The second option is transitioning into a multi-tier specific tax system and then gradually narrow down the number of tiers to become a one-tier specific system.
Both options have both advantages and disadvantages, but PwC Vietnam believes that the first is more reasonable for Vietnam. According to the Asia Illegal Tobacco Index, in 2017, more than 24.3 billion illegal cigarettes were consumed in Vietnam, or 23.4 percent of total tobacco consumption.
December 27, 2022