Czech Lawmakers Approve Hike in Excise Duty on Cigarettes

Source from:  České noviny  07/31/2014

The Czech Chamber of Deputies approved a hike in excise duty on cigarettes and tobacco products today in order for the Czech Republic to comply with EU requirements, with the move likely to raise the price of a packet of cigarettes by Kc3 to Kc4.

The change to the law on excise duty, approved by lawmakers today, is yet to be discussed in the Senate and signed by the President.

The bill allows to sell cigarettes at their current prices mostly no longer than four to five months after its approval.

The government was criticised mostly by the right-wing opposition that its proposal would increase more the price of more expensive cigarettes than the prices of cheaper ones.

This will put importers of cigarettes at an advantage compared with domestic producers, the critics said.

Some lawmakers therefore proposed that the price be increased by different means. They proposed cutting the fixed part of the tax and raising its minimum amount always by one heller per cigarette, for example.

But none of these adjustments were supported by the Chamber of Deputies, because Finance Minister Andrej Babis (ANO) did not approve of them.

The reason behind the hike in the excise duty is a weaker rate of the crown, as a result of which the Czech Republic does not comply with tax rates set by the EU, denominated in euros.

But the Czech Republic would have to propose a bigger increase of the tax because of the crown's rate valid as of October 2014, when the crown will probably still be under the influence of last year's forex interventions by the Czech National Bank (CNB).

The state should get Kc2.8bn in extra tax revenues a year compared with the current legislation, in effect since January, when cigarette prices increased by about Kc2 per packet.

But the calculation of the figure does not take into account the effect of stocking up ahead of the tax hike.

As of the beginning of this year, the EU requires an excise duty of EUR90 per 1,000 cigarettes and 60 percent of the weighted retail price.

The new excise duty tax must take effect by September 30. Enditem