Cigarettes will become more expensive by at least 10,000 lei (28 euro cents) sometime this week, as producers need time to implement the law. The government should publish an emergency ordinance establishing the fiscal consolidation of the vice tax in the excise, writes the Bucharest Daily News. The government had decided on 19 April that the vice tax be included in excises, in order to make collecting and levy procedures more effective. This solution fends off eventual criticism from the European Union as to double taxation, which is forbidden by the communitarian acquis. Producers await the ordinance, as they cannot yet establish new prices. Finance minister Sebastian Vladescu announced the ordinance would be introduced 2 May. Even so, it will take producers several days to compute the new prices, to prepare a list, register it with the ministry of finance, obtain a notice from the ministry and publish the list in national newspapers.
The 17-law Health Reform bill, which passed in a confidence vote in Parliament, provides the vice tax which is meant for the fight against excessive consumption of tobacco and alcohol products other than wine and beer. Funds levied are to be used for the financing of health expenses; mainly investment and national health programmes. The contributions will become actual revenues of the health ministry beginning 1 January 2007. According to the law, producers or importers of tobacco products shall contribute 10 euros per 1,000 cigarettes, leading to a 20 euro cents increase per pack, to be found almost entirely in the end price.
National Bank of Romania (BNR) governor Mugur Isarescu recently warned of the inflationary pressures resulting from the introduction of the vice tax, mainly due to the four per cent share of cigarettes in the consumer price basket. Dragos Negrescu, economic consultant with the European Commission Delegation to Romania, believed the vice tax to be a 'contradiction' as the alcohol and tobacco industries have obtained a delay in the introduction of the minimal excise imposed by the EU, due to the fiscal burden. Romania negotiated with Brussels authorities a gradual increase in the level of excises, up to the minimal quota provided in the communitarian legislation.
Beginning 1 July, the excise for cigarettes is to grow by approximately 25 per cent. The 9.1 euros per 1,000 cigarettes tax will be maintained until mid-year, when it will grow to 11.47 euros plus 29 per cent. This will result in a 600 lei increase per pack, that will add to the 10,000 lei (20 euro cents) increase due to the vice tax. Concerns are growing as to consumers buying cigarettes on the black market and an overall reduction in revenues to the state budget. (pi)