[Intl-tobacco] Czech govt approves two-stage cigarette tax hike

[robert weissman]

Czech govt approves two-stage cigarette tax hike
Reuters

Mon 11 October, 2004
BRNO, Czech Republic, Oct 11 (Reuters) - The Czech government approved
on Monday a proposal to hike excise tax on cigarettes in two steps to
meet EU requirements, posing a threat to the country's dominant
cigarette maker Philip Morris CR. Philip Morris CR TABKsp.PR is a unit
of U.S. Altria Group MO.N . If confirmed by the parliament later this
year, as expected, the first increase would take effect in April 2005,
and the second in January 2006.

The Finance Ministry added in a statement that in the first stage, the
tax would rise to 1.13 crowns ($0.044) per cigarette from 94 hellers now
and to 1.36 crowns in the second stage.

The ministry added that the state coffers could see extra 2.55 billion
crowns ($100.8 million) from the 2005 hike and a further 6.9 billion in
2006.

It added that the proposal also leaves open a possible third increase in
2007 depending on EU decisions.

"Rising taxes may lower the consumption of cigarettes and spark an
outflow of customers toward cheaper brands where Philip Morris CR has a
weaker market position," brokerage Patria Finance said.

A Europe-wide study of anti-smoking policies due out this week will pour
scorn on Czech efforts to curb the habit.

The report, to be released on Tuesday, ranks the European Union's 25
member states, as well as neighbours Iceland, Norway, and Switzerland,
for their progress on a range of anti-smoking measures recommended by
the World Bank.

Luxembourg and the Czech Republic are expected to be singled out for
criticism over their cheap cigarettes. For main central European company
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