Research on the Impact of Tax Policy on the Tobacco and Nicotine Products Market, Including Consumer Market Trends and Risks in the Circulation of Non-harmonized Alternative Tobacco and Nicotine Excise Goods and Its Fiscal Impact

2024
Māris Jurušs, Zane Utināne

According to the EC report, it is planned to significantly increase the minimum excise duty rates on tobacco products. Unfortunately, the global and EU economies have been affected by several unforeseen circumstances in recent years (COVID-19, the war in Ukraine, the rise in energy prices), which have also significantly affected the purchasing power of consumers and the competitiveness of traders. EU member states and the European Commission are actively addressing the problems that have arisen and are looking for the best solutions for economic recovery and growth in the future. In this context, it would not be desirable to further aggravate the situation in the single market and any increases in the tax burden should be carefully considered. Since joining the EU, Latvia has increased the excise duty on all tobacco products, and has also introduced an excise duty on alternative tobacco products for several years. Increasing the tax burden has required great efforts and has significantly affected the market. Unfortunately, there is still a large illegal market in Latvia, which is based on low purchasing power and other factors. An even larger tax increase would be hasty and should be carefully evaluated in the future. In order to reduce smoking for the sake of human health, an increase in the tax is justified, however, it must be proportionate to economic growth and purchasing power, which will be limited in the coming years due to external circumstances. Therefore, any further increase in the tax should be set at a proportionate increase of a maximum of around 5% per year and a sufficiently long transition period, for example until 2030.

Keywords
excise, tobacco, alternatives, EU

Jurušs, M., Utināne, Z. Research on the Impact of Tax Policy on the Tobacco and Nicotine Products Market, Including Consumer Market Trends and Risks in the Circulation of Non-harmonized Alternative Tobacco and Nicotine Excise Goods and Its Fiscal Impact. Rīga: RTU, 2024. 65 p.

Publication language
Latvian (lv)