Europe's news in English

COPY LINK

HEALTH

Higher tobacco taxes push smokers to contraband cigarettes

An increasing number of German smokers are turning to contraband cigarettes in response to higher tobacco taxes, according to research published on Monday.

Published: 25 January 2010 14:10 CET

Higher tobacco taxes push smokers to contraband cigarettes

Photo: DPA

Between 2005 and 2008 the number of untaxed cigarettes smoked in Germany grew from 16 to 20 percent, according to Hamburg Institute of International Economics (HWWI) Director Thomas Straubhaar at a conference in Berlin.

Instead of reducing the number of cigarettes smoked, the tax has only increased the number of illegal cigarettes consumed – some 23 billion, according to Straubhaar.

The tax increase has also created an overall reduction in tax revenue earned on tobacco, HWWI expert Michael Bräuninger said, adding that he expected a continued increase in contraband cigarettes.

According to a study by the DZV German cigarette association presented at the event, the increase means a yearly loss of some €4 billion.

The highest number of banned smokes – most of which come from Poland – are consumed by eastern Germans, where every second cigarette is reportedly untaxed. Meanwhile every fifth cigarette in the state of North-Rhine Westphalia is contraband.

At about €140 per thousand cigarettes, Germany has Europe’s fourth highest tobacco tax after Ireland, England and France.

Member comments

Log in here to leave a comment.

Become a Member to leave a comment.

Beskæftigelsesfradraget: What is Denmark's employment allowance?

What is the employment allowance?

The Beskæftigelsesfradraget (from beskæftigelse, meaning employment, and fradrag, meaning rebate) was brought in by the centre-right Liberal Party back in 2004, the idea being that it would incentivise people to get off welfare and into a job.

Everyone whose employer pays Denmark’s 8 percent AM-bidrag, or arbejdsmarkedsbidrag, automatically receives beskæftigelsesfradraget. Unlike with some of Denmark’s tax rebates, there is no need to apply. The Danish Tax Agency simply exempts the first portion of your earnings from income taxes.

In 2022, beskæftigelsesfradraget was set at 10.65 percent of income with a maximum rebate of 44,800 kroner.

How did the government agree to change the employment allowance in its coalition deal?

In Responsibility for Denmark, the coalition agreement between the Social Democrats, the Liberals and the Moderate Party, the new government said it would set aside 5 billion kroner for tax reforms.

Of this, 4 billion kroner was earmarked for increasing the employment allowance, with a further 0.3 billion going towards increasing an additional employment allowance for single parents.

According to the public broadcaster DR, the expectation was that this would increase the standard employment allowance to 12.75 percent up to a maximum rebate of 53,600 kroner.

How might this be further increased, according to Børsen?

According to a report in the Børsen newspaper, the government now plans to set aside a further 1.75 billion kroner for tax reforms, of which nearly half — about 800 million kroner — will go towards a further increase to the employment allowance.

The Danish Chamber of Commerce earlier this month released an analysis in which it argued that by raising removing all limits on the rebate for single parents and raising the maximum rebate for everone else by 20,300 kroner, the government could increase the labour supply by 4,850 people, more than double the 1,500 envisaged in the government agreement.

According to the Børsen, the government estimates that its new extended allowance will increase the labour supply by 5,150 people.

Url copied to clipboard!