Amcham asks to reconsider the calendar of excise tax increase on tobacco products, stipulated in the Moldova - EU Association Agreement.
The American Chamber of Commerce in Moldova (Amcham) wrote this in a letter addressed to the Speaker of Parliament and Prime Minister of Moldova. It states that one of the priorities set by the members of the organization is to extend until 2030 the deadline for adjusting the minimum excise tax for tobacco products in Moldova to the European level and to increase gradually the excise tax for cigarettes in the medium term so as to ensure stability and sustainability of budget revenues and reduce the risks of illicit trade in tobacco products. The letter states that tobacco products provide about 80% of all excise duties in Moldova. However, the growth rate of tobacco excise revenues in 2018-2020 was 1.5 times higher than the inflation rate. In 2022, the minimum excise tax on cigarettes in Moldova is 48 euros/1000 pieces, and in 2023 it will rise to 55 euros. In order to achieve the excise rate applicable in the EU in 2024-2025, the Moldovan authorities will have to increase excises annually by 18 euros/1000 pieces on average, and this increase will be 4 times higher than in previous years, which will negatively affect the legal tobacco market and state budget revenues. Amcham notes that the competent institutions of Moldova make great efforts to counteract smuggling, but regional studies in this area reveal record numbers of illegal imports of cigarettes into the EU territory and Romania in particular. At the same time, the presence of the Transnistrian region, known as a "gray zone" in terms of administration and control, is an additional risk factor for smuggling and reduced budget revenues. Although even in states where there are no uncontrolled territories and there are better opportunities, the fight against smuggling against the background of increased excise duties has failed. For example, in the Baltic States, Bulgaria and Romania in 2009-2010, excise taxes were increased annually by 9-10 euro/1000 pc. This led to a significant increase in illicit trade in cigarettes: in Latvia by 54%, in Lithuania by 47%, in Bulgaria by 40% and in Romania by 36%, while losses to the budgets of these countries exceeded 1 billion euros. "The same trend is observed in EU candidate countries. In Montenegro, for example, the increase in excise duties in 2017-2018 led to a doubling of smuggling and a 30% reduction in budget revenues. Importantly, the Montenegrin government reduced excise taxes in 2019, at which point budget revenues recovered. At the same time, the Association Agreement between Ukraine and the EU does not stipulate a timeframe for applying Directives 2011/64 and reaching a minimum level of excise taxes on cigarettes. Nevertheless, Ukraine has been actively increasing excise duties on cigarettes in recent years. This has led to an increase of smuggling cigarettes by 20% in 2021, and budget losses from it exceeded 390 million euros," said the letter of Amcham. Amcham says counterfeit tobacco products, in the production of which components of dubious quality are used, is another negative factor of a significant increase in excise taxes. "This will affect the health of adult consumers of tobacco products, many of whom claim they will not quit smoking regardless of product prices, they will simply look for more affordable options. The illegal sale of counterfeit cigarettes also poses a risk of revenue shortfalls to the state budget," the American Chamber of Commerce emphasizes. // 11.08.2022 – InfoMarket
