Latvia to Increase Taxes on Tobacco and E-cigarettes
According to a news report from Latvia on October 9th, starting from 2024, Latvia will gradually increase the consumption tax on e-cigarettes, cigarettes, alcohol, and alternative tobacco products. This amendment bill has received government support on October 9th.
The Latvian Ministry of Finance has announced that the increase in consumption taxes on cigarettes, e-cigarettes, and alternative tobacco products is aimed at increasing national budget revenues and ensuring the normal functioning and development of the government, including providing additional funding for healthcare, domestic and international security, and the education system. The ministry has emphasized that the taxation of these products is primarily driven by a concern for public health, while also maintaining the country's budget income and not impeding the free trade of these goods within the European Union market.
From March 1, 2024, a three-year phase of increasing consumption tax will commence, gradually raising the consumption tax on e-cigarettes, cigarettes, cigars, and interchangeable goods, while also reducing the retail price differences between them. The consumption tax on the aforementioned products will be adjusted annually on January 1 in both 2025 and 2026.
The proposed tax plan for e-cigarettes and their components aims to increase taxes by an average of 21% annually. By 2026, the consumption tax on each milliliter of e-liquid is expected to reach 0.35 euros.
The annual increase in tobacco excise tax by an average of 5.6% is expected to result in a price hike of approximately 0.14-0.2 euros per pack of cigarettes. Currently, the excise tax on tobacco is around 0.14 euros per gram of tobacco. The tax on each gram of tobacco is 0.02 euros, while the tax on tobacco and tobacco leaves is 0.09 euros. As for heated tobacco, the tax amounts to approximately 0.22 euros.
The plan is to increase the consumption tax on tobacco and tobacco leaves by 10% annually. By 2026, the consumption tax on 1000 grams of tobacco will reach 122.3 euros, and the consumption tax per gram of tobacco will be 0.12 euros. Currently, the consumption tax on tobacco is 67% of the minimum consumption tax on cigarettes, so this proportion will remain unchanged in later stages of tax increases.
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