BAT Lobbies Against Algerian Tobacco Tax Hikes

by Ulrika Lomas, Tax-News.com, Brussels

23 August 2012

British American Tobacco's (BAT) Algerian subsidiary has called on the government to refrain from taxing tobacco consumption too heavily, citing the negative effects of high taxes.

In a press conference, BAT's Algerian subsidiary reiterated its commitment to assist the government in its crack-down on tax evasion and smuggling from sub-saharan Africa, but said BAT would lobby the government in favour of tobacco taxation which is not “counter-productive”, especially in times when the Algerian government is currently tempted to hike tobacco taxes.

Citing the Egyptian example of its 2010 tobacco tax hike, where the illegal market's share of total local cigarette sales has soared from 0.01% to 20% in just 18 months, BAT argued that heavy tobacco taxation has the equivalent effect of subsidizing unhealthy smuggled cigarettes.

By way of comparison, taxes represent 52% of the price of a cigarette pack in Egypt while in Algeria it has been set since 2011 at DZD11 (USD 0.14) per pack of 20 cigarettes, which is usually charged at DZD100 to the consumer, ie 11%.

BAT Algeria's compliance and public relations director Fayçal Khalef warned that Algeria should not subsidize contraband through high taxes and lost tax revenues, and argued that the “contraband lobby is powerful enough to pressure Algeria's government with a view to taxing tobacco heavily”.

“We have conducted studies and have noted that some cigarettes with unknown origins may contain up to 18 substances exposing to cancers”, said BAT. It has also estimated net lost taxes due to tobacco smuggling worldwide between USD20bn and USD40bn.

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