Successive changes in tax laws for tobacco products have changed the Special Consumption Tax (SCT) from a mainly proportional to a primarily flat tax, reducing the price differential between cheaper and more expensive tobacco products, based on a study published by the Centre for Planning and Economic Research (KEPE).
Between July 2009 and November 2012, the minimum SCT increased by 66.67 percent, the fixed SCT increased by 1351.85 percent and the SCT proportional to retail prices was reduced by 62.84 percent, resulting in a total average increase in SCT by 19.57 percent.
The changes mean that Greece had the highest total percentage tax (VAT plus SCT) in the European Union (87.45 percent of the average weighted retail price) and the second-highest rate of total SCT (68.75 percent of the average weighted retail price) after the United Kingdom. The ‘fixed’ portion of the SCT as a percentage of the average weighted retail price reached 48.75 percent in Greece, compared to an EU average rate of 33.82 percent. The minimum special consumption tax, meanwhile, was the fifth highest in the EU and the sixth highest in terms of purchasing power.
The report highlights that the extra tax burden had made Greek cigarettes less competitive and also increased the price difference between legal and contraband cigarettes, with the illegal trade in cigarettes jumping from 3 percent in 2009 to a fifth of the total market in 2013. This had a negative impact on total revenues from VAT and SCT, while any further increase in SCT was forecast to lead to a reduction in total tax revenues.
The report advises a revision in cigarette taxation, noting that total tax was less important than the part of the tax burden that was changed to counteract these effects, while also noting the impact on health illegal cigarettes have because of higher concentration of dangerous substances than their legal counterparts.