Raising the excise tax on cigarettes, spirits and methane will not pass by Bulgaria, but for now at least it has been postponed. Obviously, the grim outlook of the revenue part of the budget still gave way, in terms of importance, to the low standard of living in the country and the Government has decided not to increase the pressure on family budgets.
The projected increase for cigarettes is associated with the European commitment of Bulgaria to reach the EU minimum excise duty levels by 2018. Now state inserts 148 levs worth of excise duty on 1,000 pieces in the price of cigarettes, while in EU minimum requirement is EUR90 per 1,000, which is approximately 180 levs. The difference of 32 levs will have to be made up for in the next four years, but we refused to increase this burden next year so that since 2015, in the remaining three years, Sofia will catch up with the level of the minimum rate in Europe, said Deputy Finance Minister Lyudmila Petkova.
Days before her statement Industry Watch estimated that just due to the excise duty a pack of cigarettes may rise in price by 15 to 18 percent, or by between 69 and 80 cents. In addition to the specific one, however, there is an valorem excise duty (depending on the value), which is currently 100 levs per 1000 pieces plus 23% of the sales of the cigarettes. This is an adjustment that can influence the market itself – e.g. cheaper cigarettes to be burdened more and more while the expensive ones – less so. That is why no one can prophesize what the increase after nearly a five-year period may be. The recommendation of the European Commission, however, is that the process takes place gradually.
Upon entry into the community the excise taxes on tobacco products have shock increased twice in Bulgaria. Along with that the government has lost its option to impose lower excise duties on cheaper cigarettes produced locally against the more expensive imported brands. Difference in price between the cheap and expensive cigarettes virtually melted. During the period 2009-2010, the impacts of the economic crisis and higher prices sharply narrowed the legally traded volumes of cigarettes. Moreover, this makes smuggling more profitable because of increased profits. So now rates are higher, but actually taxed cigarettes diminished in volume compared to the period 2007-2008, noted the analysis of Industry Watch.
Otherwise, the revenues from excise duties on tobacco retain their role as a predictable and reliable source of funds for the Treasury and for the first six months of the year the state collected 818 million levs. According to preliminary estimates for the 2013 excise tax on cigarettes should bring about 6.1 percent of the total budget revenues. Compared to 2005, the state imposes 1.2 billion levs more on tobacco products in taxes and duties.
The BANKER
