Ministry of Finance proposes significant increases in excise duty on tobacco products
Last week, the Ministry of Finance presented a proposal to increase the scale of excise tax increases on tobacco products, informed Łukasz Kozłowski, the chief economist of the Federation of Polish Entrepreneurs. “The Ministry of Finance presented a new proposal for changes in excise tax on tobacco products. Currently, changes in excise tax are included in the so-called road map, which assumes an increase in this tax by 10 percent each year. Meanwhile, the new proposal of the Ministry of Finance assumes that excise tax on cigarettes from 2025 would increase by 25 percent, on smoking tobacco – by 38 percent, on innovative products – by 50 percent, and on e-cigarette liquid – by 75 percent,” Kozłowski told PAP. The Ministry of Finance informed then that it was in the process of dialogue on changes in excise tax.
“Poland may ruin 10 years of overcoming the problem of illegal cigarette trade. The grey zone is currently at its lowest level in years. The sale of cigarettes from illegal sources, which in 2015, after a sudden increase in excise duty, increased to almost 20 percent, has fallen and currently stands at 5 percent. The excessive and sudden increase in excise duty proposed by the Ministry of Finance may once again lead to a situation where every fourth cigarette sold in Poland came from an illegal source,” said Magdalena Szewczyk-Pochrzęst, director of the National Association of the Tobacco Industry, during Tuesday’s conference of tobacco industry representatives.
Unprecedented increases may violate the current arrangements of the excise tax map
As she emphasized, the level of the proposed increases is absolutely unprecedented. “The Minister of Finance is proposing a 25 percent increase for cigarettes, 38 percent for smoking tobacco, 50 percent for heated tobacco and 75 percent for e-cigarette liquids from 2025,” she indicated.
She added that implementing the presented proposals would mean breaking the provisions of the so-called excise map included in the act in 2021, which provides for gradual, annual 10% increases in excise tax on tobacco products until 2027. “The map, adopted after long, year-and-a-half-year talks with entrepreneurs, is working well today, and budget revenues are growing. Despite this, they want to suddenly cross it out,” said the KSPT director.
The tobacco industry is surprised by the Ministry of Finance’s proposal
Szewczyk-Pochrzęst noted that the Ministry of Health’s proposal surprised the industry. “The Minister of Health said in an interview on July 4 that the Minister of Finance should increase excise duty on cigarettes. The very next day, industry stakeholders were invited to a meeting at the ministry on July 9, during which the minister informed us that the road map was not working and the increases would be higher than it had assumed,” she said.
According to KSPT calculations, the cheapest pack of cigarettes would cost PLN 20 after the announced increase, and in 2027 at least PLN 30. “The price difference between the cheapest cigarettes available legally and those in the grey zone will be PLN 10. We predict that consumers will move to the grey zone,” predicts Szewczyk-Pochrzęst.
Short vacatio legis and a breach of compromise – concerns of industry representatives
Maciej Ptaszyński, the president of the Polish Chamber of Commerce, who was present at the conference, indicated that introducing the increases in January, as the Ministry of Finance assumes, will mean a short vacatio legis. “In the best case, if the bill were to go to the Sejm right after the holidays, the vacatio legis would be 2-3 months. This is unacceptable and we will oppose such practices,” he announced. In his opinion, abandoning the excise map means “a breach of compromise and the principle of trust in the state.”
According to Ptaszyński, the increase will hit small trade, as tobacco products constitute at least 20 percent of the turnover of small entrepreneurs. “The smaller the store, the larger this share,” he added.
Negative consequences for farmers and public health due to excise duty increase
The president of the Polish Association of Tobacco Growers, Przemysław Noworyta, noted that the sharp increase in excise duty would hit tobacco farmers. “The association represents over 20,000 growers and workers who make a living from tobacco. We hoped that the road map would be in force by 2027. The proposal presented by the ministry means turning the table upside down and disrupting the sales market,” Noworyta argued.
In his opinion, the introduction of the increase will have negative health consequences for smokers, as the consumption of cigarettes from illegal production will increase. “This is the worst product produced in conditions that violate all standards, much more harmful than the legal one produced from certified raw material,” he emphasized.
Planned meeting of industry representatives with the Ministry of Finance
The KSPT director informed PAP that a meeting with industry representatives was planned for Tuesday at the Ministry of Finance. The information was confirmed to PAP by the MF press office.
Public health expert supports excise duty hike
Prof. Jarosław Pinkas, former national consultant in the field of public health, dean of the School of Public Health at the Medical Center of Postgraduate Education in Warsaw, said in an interview with PAP that scientific research leaves no doubt. “It shows that if alcohol and cigarettes are cheap, their consumption increases, and when their price increases, their consumption decreases,” he pointed out.
In Pinkas’ opinion, the claim that increasing excise duty will increase the grey zone and will not reduce the consumption of tobacco products is untrue. “People who say so are not telling the truth. Observations around the world confirm that the more expensive the stimulants are, the lower the demand for them,” he emphasized. (PAP)
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