La Libre reports today that figures published by the tax authority in Belgium show that legal sales of fine-cut tobacco fell by over 17% in 2017. The government lost €76 million in revenue in total from falling tobacco sales. The tax shift in November 2015 had foreseen an increase of tax revenue by €75 million in 2017. Combined with the loss of revenue, the Belgian state has lost over €150 million.
Smart tax policy protects government revenues while pursuing other policy goals. For tobacco, this means maintaining a tax differential between fine-cut tobacco and cigarettes, so it acts as a buffer for illegal trade. High taxes on fine-cut tobacco are associated with large increases in black market sales of tobacco, undermining the state’s tax take and funnelling money instead into the hands of criminals.
ESTA Secretary General Peter van der Mark said: “Decreasing government revenues accompanied with increases in illegal tobacco trade serve no policy goal. Instead, ordinary citizens are paying the price while criminals profit. An intelligent approach to tobacco tax policy is one which protects government revenues and prevents illegal trade. Otherwise, governments will see tumbling revenues, as we see today in Belgium.”