According to LIDER on June 12, Croatia announced that it would impose excise taxes on the oil used in e-cigarettes, sparking panic among traders of such tobacco products. In order to further fill the budget gap, the government decided to increase the excise tax on tobacco products again after a year, and now for the first time, the increasingly popular e- cigarettes are also included. On June 11, a draft regulation on tobacco products and excise tax rates on tobacco products was submitted for public consultation, according to which the excise tax rate and the minimum excise tax rate on cigarettes will be increased. The regulation will come into effect on July 1.
The new element introduced by the regulation is the excise tax on e-liquids. Previously, these e-liquids were subject to excise tax, but the excise tax was zero euros. Now, the excise tax on e-liquids will be 0.20 euros per millilitre. From the beginning of July, the excise tax on heated tobacco will increase from 185.82 euros per kilogram to 198.50 euros, and the excise tax on "new tobacco products" will increase from 114.15 euros per kilogram to 120.50 euros.
For most traders dealing in such tobacco products, the imposition of excise taxes on e-liquids means the end of their business, says Filip Tokić, member of the Dotmod Management Board. “ Depending on the proposed amount, the price of e-liquids will increase by 100 to 500 percent. For example, a bottle of e-liquid that previously cost 10 euros will now cost 40 euros. Few people will be willing to buy a product that is so uncompetitively priced. Another problem is that we have not received any instructions from the Ministry of Finance, so we do not know whether the excise tax will also have to be calculated on existing stocks, or only on new stocks, after the regulation comes into force on July 1. We do not know in what way the products must be marked, or whether the excise tax will have to be paid in advance . ”
According to government estimates, the increase in specific excise taxes and minimum excise taxes on cigarettes, as well as the increase in excise taxes on other tobacco products and tobacco products, will bring an additional 74.7 million euros to the state budget. It is worth mentioning that excise taxes on tobacco products are one of the main sources of revenue for the state budget, and due to the relatively stable consumption of tobacco, its revenue is also quite predictable.
The government explained: "In addition to fiscal benefits, increasing the excise tax on tobacco products can also bring health benefits and reduce the consumption of tobacco products, which is in line with international obligations assumed within the framework of the World Health Organization." However, Filip Tokić believes that from a public health perspective, the effect may be the opposite.
Croatia has been unsuccessful in quitting smoking for decades and now finally has tangible positive results, with a significant drop in the number of smokers. However, the introduction of an excise tax will lead to a massive return of tobacco consumption and the creation of a large black market for unregulated products, which will have disastrous consequences for the health of citizens. 14,000 people die every year from smoking-related diseases, and it is estimated that the cost of treating smoking-related diseases exceeds 700 million euros per year! All the positive public health gains will be wiped out, as the state plans to earn millions of euros every year from the excise tax on e-liquids. Filip Tokić points out that this is a regrettable and destructive policy of the Government of the Republic of Croatia.
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