The German government plans to raise taxes for tobacco products instead of taxing heavy industry as originally envisaged in the government's economic austerity program.

German Chancellor Angela Merkel’s coalition agreed late yesterday to water down planned cuts to energy subsidies for companies with the difference in part to be made up with the tobacco-tax increase.
The tobacco-tax increase will take place incrementally from 2011 to prevent smokers from rushing to cheaper brands, the finance ministry said. The levy on less-taxed products such as roll-your-own tobacco would be raised faster as to avoid price distortions. A pack of 19 cigarettes would be taxed between EUR 0.04 and EUR 0.08 more per year, while a 40-gramme pack of loose tobacco would be levied EUR 0.12 to EUR 0.14 more.
Beginning next year, the government would raise a predicted EUR 200 million through the tax, rising to EUR 1 billion by 2015. (pi)