“The Sting,” Italian Style – Tax Increases, but not for All

18 June 2010: the Council of Ministers approved a Decree Law that abolished Italy’s “minimum price” on cigarettes and introduced a “minimum tax” in its place.

For brands in the high price range sold at 4.50 a pack, nothing will change: the same taxes, the same prices and especially, the same makers’ profits.

The tax will hit the cigarette manufacturers who sell at lower prices; if they want to make the same profits as before, they will have to raise their prices, bringing them up closer to those of Marlboros.

Yesmokes will stay at 3.80 euro, while the others very likely from today’s 3.80 will go up to at least 4.20 euro.  The makers who until today sold their cigarettes at 4.20 euro, too, will have to jack up their prices if they want to continue making the same excessive profits as before.

So, in the end Yesmokes may end up costing half a euro less than the brands, which, up to now, thanks to the minimum price, had the same cost.

With this partial liberalization of the market, the State will get more tax revenues from cigarette sales. But by excluding Marlboros from the measure, this increase will be much lower than it could be, letting the multinationals of the sector keep a consistent part of the earnings that could have gone to the State.

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