Canary Islands Slap Tax On Tobacco Imports

by Ulrika Lomas, Tax-News.com, Brussels

15 August 2001

The regional government of the Canary Isles has applied to the EU (of which, through its relationship to Spain, it forms a part) to levy a 45% tax on imported tobacco. There is a substantial and highly subsidised tobacco industry in the Canary Islands, so this is a piece of typical CAP protectionism.

A report from a local consultancy suggests that the result will be job losses in the distribution market, but it's hard to understand why. The cost of imported brands will rise by 30%, but local brands will presumably sell more to make up the difference.

The Canaries form an archipelago made up by seven main islands, located in the Atlantic Ocean near the Tropic of Cancer, near the African coast of Western Sahara. The Canaries are an "Autonomous Community" within the Kingdom of Spain. The islands have their own Government, Parliament and Administration, established by the Statute of Autonomy of the Canary Islands.

The Canary Islands have a special free zone which benefits from substantial tax privileges, and much tobacco manufacturing for export takes place in the free zone. The regional government has until now imposed a five per cent customs duty on all imported products and a 15 per cent duty on tobacco products, other than in the free zone, where imports are duty-free and will presumably continue to be so for re-exported goods.

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