Tobacco tax hikes risk revenues and jobs, industry associations warn
Germany's planned tobacco tax increases could lead to lower-than-expected state revenues and fuel the black market, according to a warning from several industry associations.
Multiple German tobacco industry associations have issued a strong warning regarding the government's plans for significant tobacco tax hikes. The organizations argue that the proposed increases are unlikely to generate the anticipated additional tax revenues and are more likely to result in higher prices, a growing black market, and reduced sales in the legal sector.
Signatories, including the Bundesverband der Tabakwirtschaft und neuartiger Erzeugnisse (BVTE), the Verband der deutschen Rauchtabakindustrie (VdR), the Bundesverband der Zigarrenindustrie (BdZ), and the Verband des eZigarettenhandels (VdeH), point to past experiences where sharp tobacco tax increases have driven consumers towards illicit channels or cross-border shopping, ultimately failing to boost state income.
The industry representatives also expressed concern for the competitiveness of German businesses, particularly small and medium-sized enterprises and retailers. They believe the planned tax hikes could cause significant market disruptions, impacting investments, value creation, and employment within Germany. Furthermore, a larger illegal market weakens consumer protection and youth safety measures.
The associations are calling on the government to reassess its revenue forecasts and implement more moderate and predictable tax policies. They argue that regulations should aim to strengthen the legal market rather than encourage illegal trade.