TDR Raises Cigarette Prices by 1 Kuna

Due to the new excise tax system, TDR is forced to raise cigarette prices starting January 1, 2009. The prices of TDR’s cigarettes will increase by 1 kuna, according to a statement from Adris.

‘TDR has decided on a minimal price increase for now, although due to the new excise tax system, this increase should be more than 3 kuna per pack. The new price increase, which will certainly follow, does not depend on us but on the new excise tax system,’ stated TDR’s CEO, Davor Tomašković, emphasizing that Croatia already has high retail prices for cigarettes, and with the new amendments to the Law on Special Tax on Tobacco Products, in relation to purchasing power, it will be among the highest in Europe.

The company statement notes that TDR understands the newly arisen situation and supports efforts to bring Croatia closer to the European Union, but at the same time believes it is necessary to obtain a transitional period for adjustment to the new system to slow the growth of cigarette taxes. Namely, the adopted taxation model is very radical, making Croatia the only country that, several years before joining the EU, meets harmonization conditions. TDR reminds that all newly admitted members had a transitional period of 3 to 7 years after joining the EU. Under the adopted tax system, the most popular cigarettes will, for example, be taxed at 70 euros/1000 cigarettes, while harmonization conditions require 64 euros/1000 cigarettes.

Along with a significant increase in cigarette prices, due to the adopted changes in the excise tax system and the absence of a transitional period, there will be a large increase in the gray market. ‘The long border and the large difference in retail prices are motivations for cross-border purchases and the growth of the illegal cigarette market. Estimates indicate that citizens currently spend about 60 million euros on purchasing cigarettes in neighboring countries, causing the budget to lose more than 450 million kuna. A drastic jump in taxes and prices will lead to further increases in unregistered and untaxed consumption, as well as a decrease in budget revenues,’ stated Tomašković.

The new excise tax system will also affect TDR’s operations and the sustainability of the tobacco industry in Croatia. The existence of thousands of employees and more than 2,000 cooperators in Podravina and Slavonia is threatened. TDR will no longer be able to pay 35 percent higher prices for tobacco as before. To preserve jobs, TDR will continue discussions and cooperation with the Croatian government. In this regard, TDR advocates for an excise tax model that will comply with EU requirements and will simultaneously contribute more effectively to state budget revenues and the sustainability of the Croatian tobacco economy, the company statement says.