Cigarettes in Germany increase in price again. Part 2

November 15, 2010

To smoke in circumvention of budget

Approximately each fifth cigarette is smoked in Germany in circumvention of budget. In Berlin part of counterfeit cigarettes reaches half on tobacco market, in Ruhr region - one third.

The main reason of black market development consists in sharp imbalance of prices. In German tobacco shop one pack of Marlboro (19 cigarettes) costs now 4 euro and 70 cents, in neighboring Poland and Czech Republic - twice cheaper. So, for people who leave on the border territory, to which can be referred Berlin as well (80 kilometers of the nearest market on Poland territory) the trip is repaid even with few cartons of cigarettes that are allowed to be transported through border.

By the way according to Schengen rules, now it is allowed to import not only per one carton for adult, but per four cartons from Poland to Germany. If you will go with wife that doesn't smoke you are supplied with cigarettes for half of year and absolutely legally.

Gradual price increase

German cigarette industry representatives consider that the main reason of blow up growth of demand on counterfeit cigarettes - more than twice in current decade - is sharp rise of tobacco excise tax in Germany with appropriate price increase.

Angela Merkel government has taken into consideration negative experience and in order to avoid effect of "Laffer curve" has decided to gradually accustom smokers to much higher prices. Each year tobacco excise tax will be increased just by 4-8 cents from pack and with higher tempos - on smoking tobacco: on 12-14 cents from 40 gram pack. In such a way, consider government experts, switch to roll-ups will not become so attractive from financial point of view.

According to some data, such model of gradual and differentiated increase of tobacco excise tax offered German cigarette industry itself in order, on the quiet, to increase it's own factory price on cigarettes, production and sale of which is more profitable than of smoking tobacco.