World Bank says increase of excise duties on tobacco products leads to 10-per cent cut in consumption in Moldova

Chisinau, 3 November /MOLDPRES/ - The increase in excise duties on tobacco products in Moldova starting from 2016 had as effect a 10-per cent decrease in the overall volume of sales of taxed cigarettes. The consumption dropped by 5.55 billion pieces in 2016, according to an investigation by the World Bank (WB).   

WB experts said that the taxation of tobacco products represented “an efficient instrument to reduce their consumption and the risks related to health, to increase the state budget revenues and protect the residents from the effects of poverty, triggered by the high expenses for medical assistance and the absenteeism of labour force due to the lost working days.”  

Yet, although the 10-per cent reduction is positive, a visible change of the consumption in favour of non-filter cigarettes, which cost a little, took place. This reaction of consumers shows a fiscal difference between the filter and non-filter cigarettes in Moldova, experts also said.   

The incomes got from the applying of excise duties on cigarettes increased from 1.73 billion lei in 2016 up to 2.04 billion lei in 2017. Decision-makers anticipate that the increase in the quotas of taxation of tobacco products, adopted by the parliament for 2018-2020, will increase even more the incomes got from excise duties up to 2.45 billion lei in 2018 and in 2020, they will amount to 3.31 billion lei.

The increase in excise duties on cigarettes may require an enhanced coordination with the neighbor countries (especially Belarus and Ukraine), in order to cut the illicit trade with tobacco products, which takes advantage of the differences of prices. In the long run, the additional positive fiscal impact should be caused by the decrease in expenses for health.  

World Bank’s experts said that the quotas of taxation of tobacco products should also be unified both for filter cigarettes and for non-filter ones, in order to prevent the consumption of cheaper cigarette brands after the increase of taxes for the earlier consumed brands.  

If a uniform fiscal structure is adopted in Moldova both for filter cigarettes and for non-filter ones and quotas of taxation are increased by about 25 per cent annually on the period 2021-2025, Moldova might benefit from an attenuation of health risks due to the poor consumption, the co-author of the investigation, WB expert Elisa Gamberoni said.  

In Moldova, the prevalence of smoking in 2016 was lower than in other countries of the Commonwealth of Independent States (CIS), such as Russia (49.5 per cent among men and 14.4 per cent among women) and Ukraine (39.7 per cent among men and 7 per cent among women), but it is the highest one in Europe. It is not surprising that the life expectancy of men aged 68 years is by 8 years shorter than the one of women in Moldova, the investigation also reads.

(Reporter V. Bercu, editor L. Alcaza)