Illegally Traded Goods and Services Experiencing a Surge in Popularity
In a move aimed at combating smoking and generating additional revenue, the European Commission has proposed a significant increase in the minimum tax rate for cigarettes in Germany. The proposed hike, which could see the tax on a pack of branded cigarettes rise from around 8.50 euros to over 12 euros, has sparked heated debate at the Intertabac trade fair in Dortmund.
Industry figures, including Torsten Albig from Philip Morris and Bodo Mehrlein from the Federal Association of the Cigar Industry, argue that the proposed tax hike could strengthen the illegal market. They caution that many smokers may resort to cheaper, illegal alternatives, which would benefit criminal networks and weaken the legal stock market today.
Michael von Foerster from the German Tobacco Industry Association (VdR) echoes this sentiment, stating, "Whoever overtightens the screw destroys the thread." Jan Mücke from the industry association BVTE goes so far as to call the proposal an "economic stimulus package for criminal networks."
The German Customs and Finance Union (BDZ) and Thomas Liebel, BDZ federal chairman, warn about the black market in cigarettes and e-cigarettes, with Liebel demanding a shift from reactive to proactive combat against these criminal networks. He describes Germany as a "goldmine" for tobacco smugglers.
On the other hand, the German Cancer Research Center (DKFZ) supports the idea of increasing the price of tobacco products. Katrin Schaller from DKFZ believes that such a price increase would deter young people from starting to smoke and motivate current smokers to quit.
The proposed tax hike would have a significant impact on the tobacco industry. For example, the minimum tax per kilogram for rolling tobacco is set to increase from 60 to 215 euros. This would mean a more than tenfold increase for cigar manufacturers in Germany.
The German state currently receives around 20 billion Euros annually from the sale of tobacco products. However, industry representatives doubt that this tax revenue would increase as a result of the proposed hike, suspecting that less money would be received due to a decrease in legal sales.
The Netherlands, which already has a high level of untaxed cigarettes, serves as a cautionary tale. Only 55 percent of the cigarettes smoked in the Netherlands are taxed, with 10 percent being counterfeit. Since 2019, tobacco-related tax revenues in the Netherlands have dropped by about a quarter.
In conclusion, the proposed tax hike on tobacco products in Germany has sparked controversy, with industry representatives arguing that it could strengthen the illegal market and weaken the legal market. The German Cancer Research Center, on the other hand, supports the idea, believing it would deter young people from starting to smoke and motivate current smokers to quit. The outcome of this debate remains to be seen.
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