Finland: Tobacco Tax Reform Suggested- Goodbye to

Source from:  YLE News 08/05/2013

At present, cigarettes are taxed in Finland according to the price per pack. The model being put forward by the EK would see taxes levied according to the number of cigarettes per pack.

"The current system is complex and gives different treatment to different grades of tobacco, so it should be changed," says EK tax expert Mika Jokinen.

The tobacco industry calculates that the price of the cheapest cigarettes, costing around €4.50 would go up by 60 cents. In contrast, the price of a more expensive brand, costing €5.50 would rise by 20 cents.

"The tax break that cheaper tobacco enjoys right now is fairly large," notes Lauri Mäkinen, who is the regional head of corporate and regulatory affairs for British American Tobacco. "The impetus for a reform is sure to be that fact that sales of cheaper cigarettes have nearly tripled over the past five years."

More state revenue

Taxation of alcohol was overhauled in Finland decades ago with the aim of both reducing consumption and bringing the state more tax revenues. Experts say more could be done regarding tobacco, as well.

"If a move were made to this new system, it would increase state tax revenues and perhaps somewhat cut consumption, maybe not significantly, but a little and also reduce the volume of cigarettes brought in by travellers," says Director Pasi Holm of the Pellervo Economic Research PTT. 

According to this research institute, the suggested reform in tobacco taxation could bring up to an additional 10 million euros into state coffers annually.

The Confederation of Finnish Industries EK wants to see the cabinet discuss the issue in its upcoming round of budget talks. Enditem