Moroccan Government Urges Tobacco Companies to Increase Cigarette Prices

According to a report by Hespress on December 8th, sources from the Moroccan Ministry of Economy and Finance have revealed that due to stagnant and lower-than-expected revenues from the domestic consumption tax on tobacco products (TIC), the ministry is urging tobacco companies to raise cigarette prices.

Last week, a cross-ministerial committee responsible for approving tobacco prices held a special meeting to discuss the issue. The meeting pointed out that some companies, especially those selling high-end cigarette brands, have frozen prices, absorbing the tax increases implemented in the 2022-2026 fiscal reform plan. Officials stated that this strategy has restrained the expected revenue growth from taxes.

Another meeting scheduled for next week will involve negotiations with tobacco companies. The Ministry of Finance hopes to reach an agreement on increasing the price per pack by 1 to 2 dirhams, with the price hike expected to take effect starting January 1, 2025.

Officials from the Ministry of Finance expressed concerns over price disparities at a committee meeting in November. Despite lower-end cigarette brands increasing their prices, higher-end brands have maintained their original prices, leading to a phenomenon of "competitive distortion." It is reported that imported high-end cigarettes are priced lower than some local budget brands.

The 2025 fiscal budget, set to be implemented, projects tobacco tax revenues to reach 13.7 billion dirhams (approximately 1.37 billion US dollars), higher than the 12.5 billion dirhams (1.25 billion US dollars) in 2024. The government stated that it relies on consumption taxes as a stable source of income to support the budget and reduce revenue fluctuations.

Officials emphasized the importance of increasing tobacco tax revenues as the 2026 phased tax plan nears its end. The Ministry of Finance plans to submit final recommendations to Finance Minister Nadia Fettah after this month's meeting.

Sources indicate that some companies are freezing prices in order to maintain market share and avoid passing the tax burden on to consumers. This has intensified price competition within the industry. This strategy limits the government's ability to maximize tax revenue.