Germany's Tobacco Tax Drives Down Cigarette Sales

by Ulrika Lomas, Tax-News.com, Brussels

19 July 2013

Germany's Federal Statistical Office Destatis has attributed record low levels of cigarette sales in the first half of the year to a further rise in tobacco tax in Germany, on January 1, 2013.

According to Destatis, just 36.6 billion cigarettes were subject to taxation in Germany in the first six months of 2013, the lowest figure recorded since German reunification in 1990. In the first quarter of 2013, namely January to March, cigarette sales had already fallen. In the second quarter of the year, 4.3 percent fewer cigarettes were taxed (19.6 billion sold) compared to the same period last year. The amount of taxed fine cut tobacco also plummeted by 7.7 percent in quarter two 2013 compared to the same period in 2012, dropping to 6,371 tonnes.

At the end of 2010, the German coalition Government united on plans to progressively increase the tax levied on tobacco. Consequently, the price of a packet of 19 cigarettes is rising by between 4 cents and 8 cents a year until 2015, and the price of a standard packet of fine cut tobacco (40 grams) by between 12 cents and 14 cents annually.

Although the tobacco industry initially elected to absorb the tax hike at the beginning of the year, the country's major manufacturers recently u-turned, and decided to pass the rise onto consumers. As a result, there has been a notable rise in cross-border cigarette traffic, legal or otherwise. KPMG estimates that one-fifth of cigarettes smoked in Germany have not been subject to German taxation.

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