English
Italiano ...Vado al massimo! – Going at top speed (870% profit)
“Going at top speed” is the title of a famous song of Vasco Rossi.
A pack of Virginia Slims costs its manufacturer 7 cents; he sells it at 67 cents. This is an 870% profit.
Now the European Union wants to increase the excise tax. Obviously, a thirty-cent tax increase per packet would force manufacturers to raise their prices too, if they want to continue making the same profits.
The problem is that there is a generalized concern that such a price increase would be an incentive for smuggling. Therefore, the State should waive the increase of fiscal revenues. Big Tobacco, in fact, is going at top speed, it would be a real pity to stop it!
The price of cigarettes in Italy is among the lowest if we exclude the Third World countries. How do smokers manage in New York where today a pack costs 10 dollars, or in London where it costs more than 8 euro?
While the E.U. is proposing to raise the excise on cigarettes, in Italy we are discussing not increasing taxes because prices that are high might promote contraband… In fact, Philip Morris, just like the tax collector, already adds a charge of 60 cents to every pack.
Who is it better to give our money to, to Philip Morris or to the State?
Are those who do not want to increase taxes really concerned about smuggling, or is there something else that they want?
In this backward and violent country, it seems like first we must satisfy Big Tobacco and then the State can take what is left.
And think that a mere 30 cents more in taxes on 4.8 billion packs sold in Italy in one year would amount to an additional fiscal revenue of 1 billion 440 million euro, a sum that the State has been relinquishing for many years.
With the excise increase, if Philip Morris does not want to reduce its profits and, therefore, raises its prices, and if another maker decides to absorb the increase and not increase its prices, a difference will be created that will lead to an effective liberalization of the tobacco market. This is what the E.U. is working for.
Big Tobacco does not want the excise increase; it wants the Minimum Price, which, as the E.U. says, “safeguards the profits of the manufacturers at the cost of the income of the State”.
Is this Philip Morris’s lobbyists at work, or is it a question of incompetent bureaucrats who do not know how to add and subtract?
Cigarette Taxes in the European Union
Today the excise in Italy amounts to 57% of the price of the pack; the European Union’s objective is to raise this to 63% by 2014.
The increase will not involve all the Union countries. France, Germany, the United Kingdom and Ireland, that already apply high taxes, are exempt, though if they want they can increase the excise anyway.
Other countries however, that have lower excise, will be obliged to increase it: Spain will have to raise its prices by 17.9%, Italy by 18.8%, Luxemburg by 25.4% and Belgium by 8.3%.
The price increases will be even higher for some new entries into the E.U., like Hungary that will have to increase cigarette prices by 30.1%, Bulgaria 36% and Poland 46.8%.
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