Case … tobacco

A common myth is that Greece has cheap cigarettes compared to Northern Europe. The reality, however, is that the critical parameter is not the retail price, which is always related to the disposable income of consumers. The decisive factor is the size of taxes in relation to the retail price, and here the picture is radically different.

The tax burden in Greece is 85% of the price and is one of the highest excise taxes in all of Europe. Although, of course, the excessive increase in the last decade has been one of the main factors of the “boom” of smuggling on this basis.

In particular, since 2010, the tax burden on the retail price of cigarettes, after 10 consecutive tax changes, the last of which occurred in January 2017, reached 85% from 73% in 2009. Accordingly, the average price of a pack of cigarettes on the market from 3 euros in 2009 today reached 4.18 euros, an increase of about 40%, while the disposable income of a household was diametrically opposite.

Smuggling
A comparative study of cigarette taxes in Europe by the tax fund reveals the problem again. As you know, there is a minimum threshold for excise tax on a package, which is 1.80 euros. But most governments have imposed much higher taxes, either for financial reasons or for containment reasons (public health policy).

Ireland and France have the highest ΦΚ per package (€ 8.42 and € 6.61 respectively), while the average ΕΦΚ in Europe is € 3.34. Greece ranks 14th with a ΦΚ of 2.74 euros, but that says little, because there is a small … detail: the “flourishing” of smuggling.

According to a study by the tax fund, in addition to VAT, cigarettes are also subject to excise tax, as a result of which the total amount per pack soars to 89.8%, which is … the figure for Finland.

Greece, with a final tax rate of 85% on tobacco products, is a tax-burdened country, creating an expanded “field of activity” for smugglers. The study itself refers to a study by KPMG, according to which in 2020 the European market accounted for 34.2 billion smuggled cigarettes, accounting for 7.8% of total tobacco consumption. This resulted in a loss of € 8.5 billion in related tax revenue.

What are the relative “indicators” of Greece? The country lost first place to France, where the share of smuggled cigarettes is estimated at 22.4% of the total, and the loss of income – at 550 million euros.

The number of counterfeit cigarettes has increased significantly in Greece, to 1.62 billion in 2020, up from 1.51 billion in 2019. They have surpassed the category of illegal “white cigarettes” for the first time, meaning cigarettes that are legally produced but smuggled into other countries. Consumption of this second category in Greece was 1.20 billion cigarettes in 2020, up from 1.66 billion in 2019.

The findings of inspections carried out in recent months are also troubling, as they have shown that Greece is no longer a transit hub, a station for international smuggling routes, but illegal businesses are being set up in the country that “manufacture” illegal tobacco products.





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