The Czech government has put forward a proposal to increase tobacco taxation and introduce a tax on e-cigarettes as part of its consolidation package. The plan includes a 10% increase in tobacco consumption tax next year, followed by annual increases of 5% until 2027. Heated tobacco products would see a 15% increase in tax next year, with the same growth rate until 2027. The objective of these changes is to raise revenue and discourage smoking by increasing the price of tobacco products.

If implemented, the proposed tax adjustments are expected to raise the price of a pack of cigarettes by at least CZK8-9 ($0.36-$0.40) and heated tobacco products by CZK3-4. However, the final price will depend on individual manufacturers. The government’s move follows last year’s increase in tobacco taxes, which led to a minimum increase of CZK4 ($0.18) per pack of cigarettes. However, the revenue generated from tobacco taxes fell short of the state’s expectations.

To further enhance revenue generation, the government also plans to introduce a tax on e-cigarettes in accordance with the European Tobacco Directive, which regulates these products. The new taxation proposal aims to capitalize on the growing popularity of e-cigarettes while aligning with European standards.

The ambition of the government’s plan has been met with some skepticism. Tobacco tax revenue has stagnated or declined in recent years, resulting in a decrease in cigarette sales to consumers in Germany and a reduction in the price gap between Czech and Polish tobacco products. The significant price difference between Czech and Polish cigarettes has led to an increase in cigarette smuggling.

In addition to revenue generation, the proposed taxation measures aim to reduce the number of smokers in the Czech Republic. The government has set a target to decrease the smoking rate from 20% to 15% by 2025. To support this goal, CZK100m ($4.39m) has been allocated for anti-smoking campaigns.

The Czech Republic joins other countries worldwide in increasing tobacco taxes to discourage smoking, which is a leading cause of preventable deaths. Higher taxes not only aim to reduce smoking rates but also help governments generate additional revenue and alleviate the economic burden associated with tobacco-related illnesses.

While the proposed taxation measures may face challenges, their implementation could contribute to public health goals and provide a financial boost to the government.

Article by Prague Forum