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Higher Excise Tax Frightens Investors and Grows Cigarette Smuggling Risks


It is impossible to provide accurate forecasts on how much excise tax may lower smoking level in the country, Zurab Japaridze, founder of Girchi political center, noted.

It is cynicism as if the Authorities were caring for public heath by growing tobacco products excise tax, because our citizens will  have to smoke low-quality cigarettes, Japaridze said.

“It is impossible to provide exact forecasts on how much smoking level will decline in Georgia after upturn in tobacco product prices. However, the main thing is that the state budget will lose about 500 million GEL by introducing Estonian Model of profits tax and Government is trying to collect this sum from other taxes, while government is to reduce bureaucratic and propaganda expenditures. It is cynicism to assert as if Authorities were caring for human health by rising tobacco prices. In reality, people will smoke more expensive tobacco  and they will have to buy low-quality and less food products by the remaining money. People will have less money for medications and so on. This decision is to feed useless bureaucracy at the expense of tobacco money of our citizens and this decision has nothing common with care for public health. This decision signifies that government grows taxes”, Japaridze said.

The Girchi founder noted that growth in excise tax makes alarming signal for investors.

“Regretfully, government has taken a political decision and one correct step, I mean introduction Estonian model of profits tax, i.e. tax reduction, was replaced by other incorrect step and  other taxes were increased. This is a definitely bad decision in terms of economic aspects and it is an alarming signal for investors that the new government has started activities by growth in taxes”, Japaridze noted.

Higher tobacco excise tax may raise smuggling risks in the country, Japaridze added.

“There are smuggling risks and many developed countries face this challenge, the countries with much more resources to efficiently control their borders. Great Britain is a good sample, where about 30% of tobacco market is occupied by smuggled tobacco products”, Japaridze noted.