SPAIN
Spain raises tobacco tax

Spain said on Friday it would raise tobacco taxes, three weeks after a ban on public smoking, but traders saw the tax hike as insufficient to fight cheap rival brands and shares in Spain's biggest tobacco firm fell.

"The proliferation of cheap cigarette brands has led to a significant fall in the price of tobacco which encourages consumption of this product, which is harmful to health," deputy prime minister Maria Teresa Fernandez de la Vega told a press conference after the government's weekly cabinet meeting.
She said it would raise the cigarette tax from Saturday by 1 percentage point to 55.95 percent by value and would raise a second tax to Euro 6.20 from Euro 4.20 per 1,000 cigarettes, confirming an earlier Reuters report.
However, the changes are seen as having a limited impact on the price of cigarettes, particularly cheaper brands, which cost as little as Euro 1 to 1.50 for a pack of 20 compared to Euro 2.25 for a packet of Fortunas, made by Altadis, or Euro 2.75 for Philip Morris' Marlboro cigarettes.
The two tax hikes would together only increase the price of the cheapest packets by around 5 cents to Euro 1.05.
"It's bad for the sector," said analyst Antonio Castell at Spanish brokers Ibersecurities.
"If the makers want to maintain their margins they will have to raise the price around 13 per cent in the case of Fortuna or 11 per cent in the case of Marlboro."
Spain is Europe's second biggest per capita consumer of tobacco after Greece according to market researchers Euromonitor. The government introduced a law on 1 January 2006 banning smoking in offices, hospitals, schools and malls and also forces large bars and restaurants to provide no smoking areas.
The high-end cigarette makers had been looking for a tax rise to hike the minimum price of a packet of 20 cigarettes to close to Euro 2 but in an apparent response to the tobacco firms' calls, Fernandez de la Vega said Spain's hands were tied.
The association that represents large tobacco firms operating in Spain, including Altadis and Philip Morris, said earlier on Friday they had asked the government to introduce a minimum tax on their products. Both cigarette makers launched their own low-cost brands last year in a bid to halt sliding market share but damaged margins as a result. (pi)

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