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Tobacco Companies may Stop Investing if Excise Tax Increases

Tobacco Companies may Stop Investing if Excise Tax Increases

The draft law  was discussed at the government session and the new excise rates were established.

The project envisages an increase in excise tax rate on tobacco and alcohol from January 1, 2016. Government officials report that the draft law aims to tighten tobacco control measures, approximation to the EU legislation and alcohol excise rate optimization.

According to  the draft law, from January 1, 2016, excise tax increase is planned  on the following products:

– Filter cigarettes (20 pcs)  – 0,20 GEL;
– Unfiltered cigarettes (20pcs ) – 0.05 GEL;
– Cigars (one pc  and 20 pcs of  cigarillos) – 0.4 GEL;
–  pipe and chewing tobacco 1 kg – 5 GEL.

  • filtered and non-filtered cigarettes (20 pcs)  excise tax increases from  5 to 10 percent.
  • from January 1, 2016, the excise tax rate increases on whiskey , rum , gin from 10 to 15 GEL, and other alcoholic beverages and ethyl alcohol (except wine and chacha, prepared from distilled spirits, liqueurs and other alcoholic beverages)  excise rate will  increase   to 10 GEL.

Director of  “Imperial Tobacco” representation in Georgia Irakli Nadareishvili talks about  a risk of reduced investment, as business always invests in those areas where there are   transparency, predictable rules of the game, the long-term vision of the business and clear signals from the government as to how it intends to regulate the business.

“Today, companies have  to operate in an unpredictable environment, and this is reflected in the volume of investments. Another increase in excise taxes is the decision taken without business’ involvement, despite the fact that the government promised to consider the businessmen’s views in making any economic decisions. It should be borne in mind that the tobacco industry provides 6% of the total budget revenues. In the case of excise growth, there is a risk of smuggling, since the difference in the prices in Georgia and neighboring countries will be critical. In this situation, the importation of contraband products will be very profitable,” Irakli Nadareyshvili notes.