EU Countries Reach Deal On Tobacco Tax
BRUSSELS -European Union countries Tuesday agreed to raise taxes on tobacco products sold in the bloc, in a bid to protect public health and boost government revenue.
Under the deal, starting in 2014, the minimum tax will be raised to 90 euros ($134.8) per 1,000 cigarettes, and no lower than 60% of their sales price. The current minimum rate is 64 euros per 1,000 cigarettes and no lower than 57% of the sales price.
EU countries have different tax rates on cigarettes and other tobacco products since many countries impose taxes higher than the bloc’s minimum rate. Eastern European countries that joined the bloc in 2004 generally have lower rates than older EU members.
EU countries that don’t yet tax tobacco at the minimum rate, or have only recently raised rates to this level, will have until 2018 to comply with the new tax level.
The EU has been trying to raise tobacco taxes in these countries, both for health reasons and to prevent smuggling and black-market tobacco sales that rob states of tax revenue.
Swedish finance minister Anders Borg, who chaired the regular monthly meeting of EU finance ministers, said this agreement was important for health reasons and for EU states’ tax revenue.
Pressure from Brussels and a desire to plug budget holes has already prompted some east European states to commit to increasing tobacco taxes on cigarettes. Poland is set to lift its excise tax on cigarettes by 2.6% to 228.80 zlotys ($81) per 1,000 units as of January. That compares with a planned 43% increase in Bulgaria’s excise tax on cigarettes to 76 leva ($58) per 1,000 units as of 2010.
Bulgarian Finance Minister Simeon Djankov defended the proposed steep increase in cigarette taxes on public-health grounds, and dismissed claims that the government is only interested in boosting tax revenue.
Critics of the increase argue that it will lead to growth in the smuggling that has plagued Bulgaria for years.
By Adam Cohen and Joe Parkinson, Dow Jones Newswires; +322 741 1486; adam.cohen@dowjones.com
