At the end of last week, the Finance Ministry informed tobacco manufacturers it will lower the ad valorem excise from 18% to 14% as of April 1, 2015, although the excise was only supposed to be adjusted by one percentage point according to the calendar agreed with the European Commission and this proposed level was to be reached in 2018, at the end of the established calendar.
The Finance Ministry also said it would consider an exchange rate of RON4.73 to the euro, the same as this year, but did not rule out indexing the rate for inflation.
Raising the minimum excise from EUR81.5 per one thousand cigarettes to EUR84, the level of the tax amounts to RON397.32, which translates into more than EUR90 at the exchange rate calculated by the European Central Bank on October 1, 2014, of RON4.4093 to the euro. The EUR90 level was targeted for 2018.
Lowering the ad valorem excise to 14%, which is calculated on retail price, reduces the price gap between premium and cheaper cigarettes.
“Already the price of cheaper cigarettes are much higher than those of cigarette son the black market and this measure will widen that gap even more, which will lead to a rise in contraband,” said Gilda Lazar, director of corporate affairs of JTI Romania.
The excise calendar agreed with the European Commission sets the minimum excise at EUR84/1,000 cigarettes in 2015, EUR86.5 in 2016, EUR89 in 2017 and EUR90 in 2018. Also, the total excise should be EUR86.96 in 2015, EUR89.55 in 2016, EUR92.14 in 2017 and EUR93.18 in 2018.
At an exchange rate of RON4.73/EUR1, the total excise of EUR86.96/1,000 cigarettes is RON411.32, which is the equivalent of EUR93.28 at the ECB exchange rate of October 1, higher than agreed for 2018.