Georgia raises excise duty on tobacco products

Smokers in Georgia should be prepared to pay more for their nicotine hit - excise tax on tobacco products increased today.

Specifically, ad valorem tax [Latin for according to value] on cigarettes has increased, which will ultimately result in a rise in overall tobacco costs. Ad valorem tax is a tax based on the value of a product. The changes means in Georgia tobacco companies must now pay five percent of the value per a box of cigarette.

Georgia’s Finance Ministry officially explained the reasons why the excise tax had been imposed; firstly to create conditions of an equal competition in the market, secondly to get closer to the European Union’s legislation and thirdly to increase budget revenues.

In EU member countries ad valorem tax differed. In Denmark and Sweden this tax was one percent while in the Netherlands it amounted to 0.9 percent. In other countries it varied from eight to 52 percent, while in Georgia it was five percent.

"Taxation and redistribution of the tax burden in Georgia are disproportionate. For example, excise burden on cheap cigarettes is 53.6 percent, while on expensive brands such as Marlboro it is about 27.8 percent and 18.7 percent for Parliament,” said a spokesperson from Georgia’s Finance Ministry.

Domestic production does not have any preferences; on the contrary – it is unequally taxed. It is [necessary] to create equal conditions for competitors,” the spokesperson added.

This is not the first time this year excise tax has increased on tobacco products in Georgia. Additional excise tax on tobacco products was imposed in January 2015, which followed several increases in previous years.