WASHINGTON: The Finance Ministry has found an unlikely, if temporary, ally in its effort to keep the tax revenues within target in the tobacco industry and importers of cigarettes and other tobacco products. In the first six months of the year state coffers received an additional 350 million euros thanks to the advance announcement of a hike in the special consumption tax on tobacco as of January 2017, a highly unusual practice as tax hikes are not announced in advance.
When the rumors about an upcoming increase in the tax were confirmed in May, tobacco companies started increasing their stock before the new tariffs come into force. The cheaper stock could also be used as a weapon for strengthening their market shares, as even after the tax hike from January 2017, the companies will be able to supply the market without having to introduce a rise in retail prices for the first few months.
Market professionals say that the companies have secured stock that can cover between three and five months, depending on the policy of each company and its liquidity. This means that the rise in tax takings this year is effectively deducted from next year’s revenues.
