THE GOVERNMENT has no plans to raise cigarette duty to meet the EU average, despite having the heaviest smokers in the union, high instances of heart disease and a huge gap in public finances, sources in the Finance Ministry said yesterday.
According to a Eurostat report released this week, the cost of tobacco products in Cyprus is 12 per cent below the EU average at a time when the burgeoning budget deficit is over €1 billion and smoking is a leading cause of death and healthcare costs.
According to one anti-smoking campaigner, it is imperative that the government follow the lead of other EU countries, such as the UK, where increased taxes have successfully deterred smokers.
“I think that the price should be higher. Whenever prices have gone up, smoking has gone down,” president of the Cyprus Non-smokers League and National Coalition for Smoking Prevention, Stelios Sycallides said yesterday
Asked why the government is not increasing taxes, Sycallides said “I don’t think that there is any other reason (for the low prices) except that it will increase the cost of living. They should try to reach a price that will meet their excuses but also save lives.”
Cypriot cigarette tax is 59.1 per cent of the recommended retail price (RRP). This is calculated by adding 41 cents for every 20 cigarettes to 44.5 per cent of the retail price. Cigars are taxed at a rate of €63 per kg.
This is much lower than, for example, Britain, where cigarette tax is 77 per cent of the RRP for cigarettes. The UK’s Tobacco Manufacturers estimates that revenue from this tax is £8.8 billion. In contrast, the estimated cost to the British National Healthcare Service (NHS) is £5 billion.
The British experience suggests healthcare costs can be met by increasing tax in Cyprus, since it will generate cash and deter smokers.
This, at least, is the view of the World Bank, which says a 10 per cent tax hike will reduce the demand for cigarettes by four per cent.
So far, however, it seems that the government has no plan to touch smoking taxation. Their recent fiscal package has included increases in corporate and property tax, plans to tackle tax evasion, a town planning amnesty and a reduction in welfare spending for larger families and college students.
A senior finance ministry source said yesterday “This is a political decision… I don’t think that the government has any plans to change taxation on cigarettes.”
There is some support among technocratics for such a move, but as long as 30 per cent of Cypriots continue to smoke, few politicians are likely to increase the tax, however big the healthcare bill.
A senior source in the Finance Ministry said yesterday “I think there are many different parameters to consider, but if you ask me I think they should double the tax on cigarettes. In the long run this will be better.”
The argument hinges on whether the healthcare costs outweigh the tax revenue, and whether a tax increase would restrict consumers’ ability to pay for other products, thereby holding back economic growth.
Health minister Christos Patsalides and Finance Minister Charilaos Stavrakis were unavailable for comment yesterday.
