On last September 25th, Philip Morris raised the prices of all its products by 10 cents immediately following the increases of Japan Tobacco and British American Tobacco.
This latest of an innumerable series of price rises, which involve 99% of the cigarettes on the Italian market, was not determined by an increase of fiscal pressures, that is, increasing the excise aliquots, but by decisions of the manufacturers to boost their profits.
Since 2005, cigarette producers selling in Italy have earned more and more, thanks, first to the law of the “minimum price” and now to the “minimum tax”. These laws have guaranteed them a profit of at least 380%, and these are resources siphoned off from the State coffers and from the final consumer.
Article 39-quater, paragraph 2, of Legislative Decree 26 October 1995, no. 504 states that the limit below which manufacturers cannot sell is their production cost, which would be a profit of zero, not 380%.
How This Theft Works?
How was the minimum price set so that the manufacturers had a minimum profit in Italy of 380%? Since 2004, the various Italian Governments have not updated the tax pressure on cigarettes and have permitted the producers to earn much higher profits than they earn in other European countries.
With the excuse of needing to achieve the tax revenue objectives programmed by the Government, the AAMS has increased its tax income by allowing Big Tobacco to raise the prices of its products.
But any increase of tax income coming from the producers’ higher prices also leads to higher cigarette costs for smokers, and the higher costs for smokers are greater than the tax revenue earned because part of the increase also goes to augment big tobacco’s profits.
The manufacturers’ price increases, moreover, have led to an automatic escalation first, of the minimum price, and then of the minimum tax. And any cigarette makers who may not want to increase their prices are forced to do so. Yesmoke, for example, has been obliged to raise its prices, so that it cannot take advantage of relatively low prices to increase its market share.
On the contrary, eliminating the minimum price and the minimum tax, if the State raised its fiscal pressure, that is, the excise aliquot, the State’s greater income would be equal to the cost paid by the buyers.
Therefore, an increase of the aliquot would reduce big tobacco’s profits - unless they increased their prices. But if they increased their prices, they would risk losing market share to the producers who did not.
The minimum tax swindle, at the cost of the collectivity, was devised by the AAMS in agreement with the foreign tobacco multinationals. The AAMS acted as a consultant to the world of politics, claiming that the measure was aimed at discouraging smoking, making it more expensive and benefiting the health of the citizens.
After the latest price rise, Philip Morris, for example, that before sold a pack of Marlboros to distributors at 69.38 cents, now sells it at 71.24 cents, and its profit has climbed to 495%.
If the excise aliquot in Italy was 64%, like the one in France, the greater income for the State would come close to 2 billion a year and the prices would not vary noticeably for smokers; it would be the tobacco giants who would have to give up some of their exorbitant profits.
The swindle is apparent to anyone who can add and subtract and wants to see what is happening. And yet, this absurd situation has been going on unnoticed for the past five years, and there are plenty of people who are happy to see it continue this way.