Les Echos today reported that sales of smoking tobacco in France fell significantly in 2017, with roll-your-own and pipe tobacco sales declining by 5.6% year on year, and sales of chewing tobacco falling by 2.1%. This comes on the back of a tax increase on smoking tobacco last year, and ahead of a further increase in 2018.
The cause of this decline in sales is clear: in 2017 the tax increases targeted fine-cut tobacco specifically, whilst tax did not increase for other products. In addition, the effect of the unprecedented tax on tobacco distributors was felt in 2017. The tax on tobacco distributors amounts to 5,6% of the annual turnover, leading to further cost and price increases especially for smoking tobacco and niche products which economically cannot absorb these. The increasing fiscal burden on smoking tobacco is sending consumers to the illegal market, and drives cross-border trade. In addition to ultimately resulting in a lower tax revenue for the government, these measures also place consumers at risk from illegal products, and funnel money into the pockets of criminals.
ESTA General Secretary Peter van der Mark said: “Increases in tax on fine-cut tobacco are undermining its crucial function as a buffer between higher price cigarettes and cheap illegal cigarettes. This is driving French consumers into the illegal market. Such tax policies are not good for anyone except criminals. We have already seen how taxation increases targeting fine-cut in Belgium and the Netherlands have decreased tax revenue taken by the state. The same is inevitable in France”.
