The announcement was made by the Finance Minister following the need to adjust to EU tobacco taxing directives
As is cited in the relevant EU directive, Croatia is committed to adjust to minimal tobacco taxation levels by the end of December 2017, where excise duty must be a minimum of 90 euro per 1.000 cigarettes, Tportal published on December 16, 2017.
“According to our estimates and calculations, with such corrections the fiscal effect of increased state budget revenues will amount to 160 million kuna at the annual level,” said Finance Minister Zdravko Marić at a government session and noted that, according to all calculations and projections, the cumulative effect of such corrections on the retail price is in no case larger than one kuna.
“The intention of the Finance Ministry to reach this amount was announced over a year ago, so in that sense the increased excise duty was expected and represents an upgrade of all previous increases of excise duties for the past five to six years,” said Stanko Kršlović, director of corporate affairs in Philip Morris.
Kršlović reminded that EU member nations can increase excise duty to levels above 90 euro, but also feels this makes no sense in Croatia due to the regional environment.
Josip Lozančić, regulatory affairs management member of British American Tobacco, said he understand the government’s decision as it harmonises excise duty politics.
“It is expected as we are in the last year of the adjustment. As a business subject operating in Croatia, we will adhere to the legal regulations and obligations. After the government decision is published we will be able to come to a decision whether the prices of our cigarettes will grow, and if so, how much. In any case we will make timely announcements to consumers,” said Lozančić.
Every price hike is new fuel for the black market, controlled by traders of cut tobacco, and the grey market, where cigarettes are ‘imported’ from neighbouring countries. Kršlović says the grey market in Croatia is significant, which is why price differences of cigarettes cannot be too large and this should be taken into consideration with potential future excise duty hikes.
“In that sense a moderate, properly planned and announced tax rise is a condition of the stability of business, but also state income,” concluded Kršlović.
In the beginning of November, Healthcare Minister Milan Kujundžić suggested a cigarette price markup of three kuna per box within the ‘risky behaviour tax.’ Tobacco manufacturers opposed such a drastic hike noting that cigarette prices in Croatia have gone up 40% in the past five years, making them the most expensive in EU compared to salary levels.
Translated from Tportal.
