The Case of Romanian Cigarette Market
CHAPTER VIII. STUDY-CASES
1. THE CASE OF ROMANIAN CIGARETTE MARKET
1. Introduction Among the obligations assumed by Romania by(1) the EU Adhesion Treaty (2)there is the fact that, until 2010, the minimum tax level for cigarettes must be aligned with the minimum tax level of the member states – 57% of the most popular cigarettes’ (MPPC) price, but not less than 64 Euros for 1000 cigarettes. Through the modifications made to the Fiscal Code in April 2006 by the OU 33/2006 the government approved the tax level, which will increase gradually until it reaches the required level. (In 2006, this happened two times, at an approximately two month’s interval). According to the decision, the tax of the cigarettes will be calculated by means of a fixed quota and another quota computed from a percentage of the cigarettes’ value. The first increase stipulated that the tobacco tax should be of 9.10 Euros for 1000 pieces plus 30% of the maximum price of retail selling (a medium tax of 32.13 Euros for 1000 cigarettes), which produced an increase of approx. 0.8 RON in the price of a cigarette package. Starting with the 1st of July, the tobacco tax jumped to 16.28 Euros/1000 pieces plus 29%. The 177 article of the Fiscal Code was as well modified: for cigarettes the taxes due to equal the sum of the specific and ad valorem taxes, but not less than 19.92 Euros/1000 cigarettes. When this sum is less than the minimum taxes, they are paid. The tobacco industry companies solicited a five year transition (however obtaining only three), in order for the tax level to reach 64 Euros in 2012. They claim that this period is necessary because the medium income in Romania is half the one of the other candidate states, and consumers can’t afford the increase in price. This statement is justified, even if it’s about tobacco, which is harmful for health. The Romanian tobacco market amounts almost 1 billion Euros, with a total volume of 35 billion cigarettes, and is dominated by three large
1. THE CASE OF ROMANIAN CIGARETTE MARKET
1. Introduction Among the obligations assumed by Romania by(1) the EU Adhesion Treaty (2)there is the fact that, until 2010, the minimum tax level for cigarettes must be aligned with the minimum tax level of the member states – 57% of the most popular cigarettes’ (MPPC) price, but not less than 64 Euros for 1000 cigarettes. Through the modifications made to the Fiscal Code in April 2006 by the OU 33/2006 the government approved the tax level, which will increase gradually until it reaches the required level. (In 2006, this happened two times, at an approximately two month’s interval). According to the decision, the tax of the cigarettes will be calculated by means of a fixed quota and another quota computed from a percentage of the cigarettes’ value. The first increase stipulated that the tobacco tax should be of 9.10 Euros for 1000 pieces plus 30% of the maximum price of retail selling (a medium tax of 32.13 Euros for 1000 cigarettes), which produced an increase of approx. 0.8 RON in the price of a cigarette package. Starting with the 1st of July, the tobacco tax jumped to 16.28 Euros/1000 pieces plus 29%. The 177 article of the Fiscal Code was as well modified: for cigarettes the taxes due to equal the sum of the specific and ad valorem taxes, but not less than 19.92 Euros/1000 cigarettes. When this sum is less than the minimum taxes, they are paid. The tobacco industry companies solicited a five year transition (however obtaining only three), in order for the tax level to reach 64 Euros in 2012. They claim that this period is necessary because the medium income in Romania is half the one of the other candidate states, and consumers can’t afford the increase in price. This statement is justified, even if it’s about tobacco, which is harmful for health. The Romanian tobacco market amounts almost 1 billion Euros, with a total volume of 35 billion cigarettes, and is dominated by three large