IS A CIGARETTE PRICE HIKE BETTER FOR HEALTH?
27 November, 2014
IS A CIGARETTE PRICE HIKE BETTER FOR HEALTH?
The excise duty on tobacco products will increase again. From January 1, 2015, the excise duty will increase on filtered cigarettes by 15 tetri (up to 90 tetri) and on unfiltered ones by 5 tetri (up to 25 tetri). This gradual increase of the excise duty is one of the UNO Frame Convention recommendations about the tobacco control.

Due to the increase of excise duty, the price of cigarettes has already increased several months ago. The authorities mention different studies
and say that there is a grave situation in the country in terms of disease and deaths caused by tobacco consumption. Due to tobacco - induced diseases 11 thousand people die annually; out of this figure, three thousand are passive smokers. One of the approaches of the convention on tobacco control is to decrease the number of smokers by gradually increasing the tobacco price.
“But with a gradual increase of excise duty on tobacco, can the price of tobacco products in Georgia become equal to the European one?” – We put this question to economist Irakli Lekvinadze. His answer is as follows:
“Cigarettes in Europe are very expensive. No such price-hike is expected in Georgia in the near future because the purchasing power of our population is much lower than that of the European one. But still, a considerable rise in price of cigarettes is expected. The price of tobacco should be derived from the country’s economic condition.

Q. – Will the gradual price-hike decrease the number of smokers in the country?

A. – In a long-term perspective, it may indeed yield definite results – some people may give up smoking, decrease consumption or substitute cigarettes with low-quality tobacco but in the short-term perspective the increase of an excise duty won’t decrease the tobacco consumption. Diverse campaigns, including informational ones as well as the prohibition of smoking in places of mass gathering, etc. are obligatory.

Q. – Will the excise duty hike by 5 and 15 tetri increase the threat of smuggling the product?

A. – The excise duty-hike increases the motivation for smuggling but the financial discipline, and the quality of business administration is very high in Georgia, so I think there is no threat of smuggling.

Q. – How can the excise duty increase impact the companies that are involved in the business as well as on the importers and local producers?

A. – Any increase of cigarette excise is the consumer’s problem. The producers and importers actually don’t suffer. They retain their profit margin, increase the product price and it’s the consumer who pays the increased price. Cigarettes aren’t a product you can give up at once, thus the whole burden of the price-hike lies on the consumer.

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