Cigarette tax hike could lead to more smuggling

A recent increase in the private consumption tax (ÖTV) on cigarettes may lead to more cigarettes being smuggled into Turkey from neighboring regions and a consequent drop in the country's tax revenues.According to the corporate relations director of British American Tobacco, Tuna Turagay, speaking to the Anatolia news agency, the recent ÖTV hike has scared tobacco producers, as it may create further incentive to smuggle cigarettes from neighboring countries. While a pack of cigarettes costs TL 7 in Turkey (3.3 euros), it costs 1.13 euros in Syria and about 1 euro in Turkey's eastern neighbors. In Western European nations such as France, Spain, England and Germany, a pack of cigarettes ranges from 3.75 euros to 6.9 euros in England.
The share of smuggled cigarettes in total cigarette consumption in Turkey was 7 percent in 2007, meaning a tax revenue loss of $1 billion. This share is 27 percent in England “despite the fact that it is an island nation,” said Turagay. If Turkey were to have a similar percentage of smuggled cigarettes, the amount of tax revenue lost could be over $4 billion. He added that smuggled cigarettes make up 50 percent of the total in Quebec, Canada, and 36 percent in Malaysia, due partly to high prices of cigarettes in these areas. Turagay revealed that this figure was as high as 20 percent in eastern regions of Turkey and that they feared smuggling would spread into larger metropolitan cities such as Ankara and İstanbul.
Turagay also stated that these price increases would hurt the poor the most, noting that before the ÖTV hike, a smoker would spend 19 percent of the minimum wage on cigarette consumption, while this would swell to 23 percent with the tax increase. “It’s not easy for everyone to stop smoking, and with wages as they are, it’s much more attractive to consume smuggled goods. This is our main concern,” said Turagay.
Turagay called on the government and the cigarette industry to work hand-in-hand to address this issue and stated that the public should be informed about the risks involved in buying smuggled cigarettes. Recalling that every pack of cigarettes is approved by the Tobacco and Alcohol Market Regulatory Agency (TAPDK) before being put on the shelves, he said: “Smuggled cigarettes are not approved or tested by any agency [in Turkey]. This is risky for consumers. Therefore, the government, the private sector and the public need to fight this problem together.”