Tobacco Cigarettes Market

Increasing campaign for the restoration of specific rates of excise duty of tobacco struck recently its scope. So what are fed such ideas, absurd for a civilized country? It would seem that the tobacco excise tax is only a small part of the agenda; its share in the state excise tax revenue is less than one percent. But this price issue for companies is not dumping at all. This supports the idea of specific survival rates for cigarettes. Given the data on production volumes, prices and taxes paid (at least from public sources), it is easy to calculate that, for example, "Philip Morris" issue price is about 100-120 million dollars a year. Under the present system the PM is not paying, but will pay a proportional tax at a situation that is bound to the retail price. From a commercial point of view, the efforts of the PM to preserve status quo, but better to clean and restore "specificity" deserve at least understanding. For the preservation of such amount to the shareholders is worth fighting for, not really reading all the media.

Today everywhere there is a same pattern on the cigarettes market: BAT tells local authorities about the advantages of a mixed system of levying excise duty, PM try to convince officials in the virtues of a particular system. The struggle of the two tobacco giants is the problem of confrontation between the two strategies: American (PM) and European (BAT). Philip Morris prefers to bet on the development of its international brands, which include Marlboro cigarettes, L&M, Parliament, etc. BAT, without giving up the marketing of own brands (Kent, Vogue cigarettes, Pall Mall), gladly exploit addiction population to local brands. The arguments of both parts to the filling of the budget for a particular system of levying excise taxes are pretty reasonable, it is much more surprising that lobbying for their own interests under the sauce of the health care of the nation. The representatives of BAT, for example, scare the public so that if the excise duty issue will be resolved in favor of their competitors, will suffer tens of millions of smokers who are below the poverty line due to resume "tobacco riots" of the late 80s and increase social tensions. Philip Morris Company, on the contrary, say that high taxes help reduces demand for unhealthy products.

The final choice of the scheme increases the excise rates on tobacco products that depend on whose lobby in parliament will be stronger. This recent exhibits suspicious actively involved in the dispute of tobacco manufacturers. And they promoted reform of the excise tax option miraculously coincides with the interests of Philip Morris.

"Do no harm" - this must be the principle of state tax policy. The need to increase taxes should on the one hand, not to kill consumer demand, and on the other not to provoke the illegal circulation of excise goods, such as discount cigarettes. The reform should simplify the tax system and reduce the cost of its administration, while decreasing and not creating additional complexity.

If all excise taxes are indexed on a regular basis at the level of inflation, for tobacco products that indexing should be carried out in excess of actual inflation. Indeed, in addition to the growth of budget revenues increased indexation will constrain the availability of tobacco products, which would slow the growth of potential smokers who buy cheap cigarettes.

Published: Friday, March 30, 2012