Smokers hit with larger price rise

27 December 2004

AMSTERDAM — Already coming to grips with a ban on smoking in the workplace, smokers will be hit with a larger than expected price rise in February as manufacturers use a planned increase in excise tax to further push up the cost of tobacco.

The price of a packet of cigarettes (25 cigarettes) and a packet of shag, roll-your-own (50g) will increase by EUR 0.80 on 1 February. The Finance Ministry said the EUR 0.46 rise in excise tax and BTW will together account for EUR 0.55 of the 80 cent price rise.

A packet of cigarettes will in future cost on average EUR 4.60, but prices can differ depending on their brand. The ministry said a majority of manufacturers and importers will implement the price rise.

It is not yet known what the average price of a packet of 20 cigarettes will be, but packets of Marlboro (Phillip Morris) will rise from EUR 3.30 to EUR 3.90. With a 42 percent share of the market, Marlboro is the industry heavyweight, news agency Novum reported.

The price rise is noteworthy because the tobacco industry recently complained about the planned rise in excise tax, claiming that tobacco sales would fall as a result. The industry said a fall in sales could negatively impact the government’s excise tax revenue.

A spokesman with cigarette manufacturer Phillip Morris also said the tobacco industry needed to increase prices to improve profit margins, having previously urged the government to spread the rise in excise taxes over a period of four years.

The spokesman said the price rise was necessary to compensate manufacturers for the expected drop in sales as a result of the increase in excise tax.

But the Finance Ministry claims that tobacco sales will only fall by 4 percent after excise taxes are raised and expects that government revenue will increase.

The higher excise tax could yield the government as much as EUR 400 million in revenue, but the Cabinet calculated on the low side in its budget. It has estimated that it would earn just EUR 300 million and if sales fall more than expected, the government will thus not be out of pocket.

Meanwhile, the branch association of cigarette manufacturers was not immediately available for comment.

It has been a month of changes for smokers, with new government legislation coming into force on 1 January giving employees the right to a smoke-free workplace. Smoking is now also banned on trains and undercover platforms and most smokers appear to be abiding by the new laws.

Subject: Dutch news