The REF vs. the Fiscal Appetite

“In this phase there is the risk that further price increases, consequent to the growing fiscal appetite, will encourage a shift towards illegal sales channels.”

This is written in the introduction of the latest issue.

Let’s be careful! The only publication that analyses the Italian tobacco market, the “Tobacco Observatory,” published by the REF (Economic and Financial Research), a reference for “government institutions and organismi” is making a shaky attempt at disinformation. The periodical is officially sponsored by British American Tobacco and its aim is to safeguard the profits of the cigarette manufacturers. It is taking advantage of the incompetence of politicians and inducing the State to give away needed tax income.

A Question of Sponsors

In 2005 the Tobacco Observatory inveighed against the “minimum price” of cigarettes:

“It is an obstruction to free competition; it violates the European Regulations on the free determination of prices; the European Union will intervene.”

But in 2007 British American Tobacco became the publication’s official sponsor. So, the Tobacco Observatory began saying that the “minimum price” was an ideal solution; it praised the “Minimum tax,” with which our politicians have circumvented the recent European Court sentence that imposed the abolition of the minimum price, defining it as a “selective tax.”

Here is how the REF introduced the Tobacco Observatory in the BAT sponsored version: “the Tobacco Observatory is an initiative supported by British American Tobacco Italia; its purpose is to promote a picture of widespread and transparent knowledge on tobacco issues; it is to share this objective, that the REF has prepared the following publication.”

If originally the Tobacco Observatory was a useful reference source, today with BAT’s funding, it has lost every trace of ethics. Taking advantage of widespread ignorance and incompetence, the publication is promoting the interests of thieves, using imaginary data with disturbing superficiality.

Unfortunately the “widespread and transparent knowledge,” presented in the only technical publication of the sector, and repeated uncritically in the national press, rates high in the consideration of our politicians as they make their decisions regarding the interests of the country.

According to the latest issue of the Tobacco Observatory, “Italy is on the way to becoming a potential outlet market for illegal trade because of the high price level.” But Italy, among the advanced countries, is one where cigarettes cost less. Why should this illegal “outlet market” have to be in our country, in spite of the reassurance of the Guardia di Finanza? What would happen, then, in those countries where cigarettes cost twice as much as they do here?

Always according to the Tobacco Observatory, “It can be seen that for the Italian case, the levels of taxation on tobacco products are already very high.” How can they say that cigarette taxes in Italy are higher than the European average when, in actual fact, they are lower? For example, in our country the excise aliquot has been blocked for years at 58.5% while in France it has been raised to 64%.

One issue that the Tobacco Observatory never talks about is the “tax collector” profits, unequaled in other countries, earned by Big Tobacco: Philip Morris makes a 495% profit on a pack of Marlboros, BAT reaches 380% on its MSs, and Japan Tobacco rakes in a profit of 415% on its Camels. Meanwhile the Italian State receives less tobacco taxes than other countries.

The Next “War”

Taxes yes or taxes no? Philip Morris, BAT and Japan Tobacco make higher profits in Italy than they do in France, but the Italian State earns less in taxes than the French one. Why? If cigarette prices rise, is it because the State has raised taxes or is it because the manufacturers have raised their prices? A great dilemma is ahead of us.

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