Poland Plans to Increase Tax on E-Cigarette Liquid: Implications Revealed

Aug.09.2024
Poland Plans to Increase Tax on E-Cigarette Liquid: Implications Revealed
Polish finance ministry plans increased tax on e-cigarette liquid, causing prices to surpass traditional cigarettes, sparking industry backlash.

According to BIZNES, on August 9th, the Polish Ministry of Finance plans to increase taxes on e-cigarette liquid, which will result in e-cigarette liquid being more expensive than traditional cigarettes next year.


Domestic producers strongly oppose this plan, as they believe it will lead to the growth of the grey market and negatively impact the domestic market for small and medium-sized enterprises at a legal level. The sudden increase in tax burden imposed by the government has given them very little time to prepare, only a few months.


The Ministry of Finance announced in July that it will significantly increase the tax rate on tobacco products and their alternatives (including e-cigarettes and e-liquid) starting in 2025. This decision overturns the previously established tax rules from 2021 to 2027.


According to estimates from the Ministry of Finance, the retail price of a pack of 20 cigarettes will increase by approximately 2.7 to 3.1 Zloty per year from 2025 to 2027 (equivalent to around 4.89-5.61 RMB). The price is expected to reach nearly 21 Zloty (around 38.03 RMB) next year and close to 27 Zloty (around 48.9 RMB) by 2027. Meanwhile, the price of e-cigarette liquid is predicted to rise by about 4.4 to 5 Zloty per year (approximately 7.97-9.06 RMB), with the price exceeding 23 Zloty (around 41.65 RMB) next year and approaching 33.5 Zloty (around 60.67 RMB) in three years.


Experts point out that this could encourage consumers to choose more harmful traditional cigarettes instead of milder alternatives.


E-cigarette liquid manufacturers emphasize that a sharp and sudden increase in taxes will lead to the growth of the black market. According to data from Almares research company, the grey market share of the traditional tobacco market has been decreasing since 2016, reaching a historic low of less than 5% by 2023. This trend may now be reversed.


The Ministry of Finance predicts that after the implementation of the planned tax increases, revenue from tobacco products and value-added tax will reach 420 million zloty (approximately 760 million yuan) next year, 430 million zloty (approximately 790 million yuan) in 2026, and 400 million zloty (approximately 720 million yuan) in 2027.


Experts point out that if this indeed leads to an increase in the grey market of e-cigarette liquid, the national budget will not be able to receive the expected revenue. In fact, these revenues may be even lower than before the tax increase.


Industry insiders also pointed out that the rapid and significant increase in taxes will negatively impact small and medium-sized enterprises producing e-cigarette liquid domestically. The government's sudden announcement has caused confusion in the market, leading many companies to pause their development plans.


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