Cigarette prices are expected to rise next year too. Tobacco importers claim that the reason for this is still going to be an excise tax which the Finance Ministry plans to increase next year.
According to Director of GG 2011 Ilya Zhgenti, in 2016 the excise tax is likely to increase by about 15 tetri. In Zhghenti’s words, the excise tax increase will affect the price of cigarettes, however, he can’t predict when because the companies will try to maintain prices at the expense of the stocks. Zhghenti explains that companies are trying to increase the price as late as possible because of the big competition in the market. He says that in the last 2 years sales decreased by 40% due to changes in prices.
JTI Caucasus company also expects an increase in the excise tax. The company’s communications specialist Iva Khasia states that they do not have any validated information about the excise tax but suppose that work on this issue is underway at the Ministry of Finance.
The company’s representative says in a conversation with CBW that this year the tobacco prices have hiked twice, so the increase in excise tax will have a negative impact on the cigarette business.
It should be noted that according to the draft budget for next year, the excise tax revenues amounted to GEL 922 million, which is 22 million more than the figure for the current year. At what expense does the government expect an increase in the excise tax, and whether a particular decision has been taken in this regard? CBW got in touch with Finance Ministry to get the comments on this issue. They say at the Ministry that there is nothing concrete.
An excise tax rate on tobacco products, as well as, malt beer, ethyl alcohol and alcoholic beverages increased from January 1, 2015.
With the initiative of the Government of Georgia, the Ministry of Finance of Georgia prepared a bill according to which the excise tax on one package of filtered cigarettes increased by 15 tetri and by five tetri on non-filtered cigarettes. In addition, according to the bill, the so-called mixed system will be enacted from 1 July 2015. According to this new mechanism, the excise duty on one package of filtered or non-filtered cigarettes (20 cigarettes in each) is the sum of the excise tax as determined by the Tax Code of Georgia and 5% of the retail price.
According to the explanatory note to the bill, the change will affect the budget and tax revenues in 2015 compared to last year, which are expected to rise by GEL 110 million. The purpose of the bill is to introduce the principles of fair competition in the tobacco market, simplify tax administration and get closer to the EU legislation.