New Rise in Cigarette Prices in 2014

EU wants 8.1% rise in cigarette prices by 2014. 

Maltese smokers will have to fork out more money to keep puffing in the next few years as the European Commission laid out new plans aimed at narrowing the difference in price levels of tobacco products in the 27 member states while cutting tobacco consumption.

According to computations made by the EU, the price of a packet of standard cigarettes in Malta will have to increase by 8.1% by 2014 in order to conform to the new rules on minimum taxation of tobacco products. At the same time, Brussels said that the increase in price in Malta should contribute to a reduction of 3.5 per cent in demand. The new proposed directive will need the green light of all the 27 EU member states in order to enter into force.

Smokers in the new EU member states are likely to be the most affected as taxes on cigarettes in these countries are still considered to be very low when compared to the EU average. Malta is however an exception as retail prices are already close to the average price in the EU. Currently, 60.82% of the price of a packet of cigarettes goes to the Exchequer in excise duty and VAT. Still, the EU say this is not enough.

According to the EU, its proposal, part of a four-year review of tobacco duties, would reduce smuggling.

The Commission's primary tool would be to increase the minimum tax that member states impose on cigarettes.

At present, this minimum has two elements: the tax levied as a percentage of a packet's price, which must translate into a minimum price per 1,000 cigarettes. As a percentage, tax would have to rise from 57 per cent to 63 per cent by 2014 or from €64 per 1,000 cigarettes in the most popular price category to €90 for all categories.

Duties on loose-leaf tobacco would also be hiked to bring them more closely into line with those imposed on cigarettes.

A second element in the EU's plan is to tighten definitions of tobacco products because, during the past years, manufacturers have been able to re-classify products in order to quality for lower taxes.

Although through this new directive Maltese smokers would be badly hit, the impact on fellow smokers in some of the other new member states would be dramatic. According to EU calculations, while in countries like Denmark or Finland the price increase will be of about six per cent, in countries like Poland it will rise by 46 per cent.

Statistics show that in the five-year period between 2002 and 2006, excise duties in the EU rose by 33 per cent on average and cigarette consumption dropped 10 per cent.