Higher Excises To Drive Cigarette Prices In Romania Up 35-40%

According to the current Fiscal Code, the excise per 1,000 cigarettes increases on July 1 to EUR50 from the current EUR43.

If the measure to compensate a VAT lowering on basic food is approved, the increase in the excise would be to EUR65 per 1,000 cigarettes.

The draft was adopted by the Senate on Feb 6 and is pending debate in the Chamber of Deputies, which is also the decision maker. The disapproved of the draft and the Finance Ministry said it is preparing corrective measures in the event the draft is adopted by the Chamber of Deputies.

"This legal initiative goes against the EU agreed calendar to gradually increase excises for tobacco products. We’ve had a major deviation from the calendar in 2006, with the introduction of the vice tax, later include in the excise, which had dramatic effects," said Friday the general manager of Japan Tobacco International (JTI) Romania, Martina Southgate, in a joint statement of tobacco producers British American Tobacco (BAT) and JTI.

According to Southgate, changing the Fiscal Code will have negative affects on the business environment and might attract negative comment from the European Commission for “fiscal inconsistency".

The general manager of BAT Romania, Bart Maas, said the measure will lead to hikes of 35-40% in cigarette prices, and contraband might reach as high as 30% of the total tobacco market.

"The economic impact is huge and not only affects the tobacco industry, but also its traditional partners, economic operators, who will register losses. Also, consumers will be very much affected,” Maas added.

The current calendar stipulated in the Fiscal Code sets a tax of EUR50 per 1,000 cigarettes on July 1, 2008, and the tax is to reach EUR74 in 2010. The draft amending the Code proposes a tax level of EUR85 in 2010.

The main cigarette producers in Romania are BAT, JTI and Philip Morris.