IOBE: Higher tobacco taxes will not have expected results on tax revenue

A new increase in the taxation of tobacco products will lead to a significant increase of prices (by 40-50 cents per package of 20 cigarettes and by 50 centrs per package of 30 grams of tobacco), a big decline in the consumption of legal tobacco products and finally will not have expected results on tax revenue, the Foundation for Economic and Industrial Research (IOBE) said in a report.

The report noted that with an increase in the special consumption tax on cigarettes from 20 pct to 26 pct and of the special consumption tax on tobacco from 156.7 euros to 170 euros per tax unit, the government hopes to collect an addtional 121.8 million euros in taxes annually.

IOBE noted, however, that a decline in tax revenue due to lower demand for legal tobacco products is expected to eraze any increase in tax revenues from higher tax on per unit product. Particularly, tax revenue on cigarettes are expected to be lower than expected. The report said that tax revenue from tobacco products were expected to be more than 100 million euros short of budget targets in 2017.

IOBE said higher taxes on tobacco was expected to boost smuggling of tobacco products, unless more efficient measures were introduced and noted that penetration of illegal cigarettes in the market was expected to rise by more than five percentage points to 30 pct of total cigarette consumption.

The report said that the tobacco industry offered around 1.2 billion euros in added value in the Greek economy and 28,500 job positions (in terms of equal full employment) directly or indirectly related with the industry.