Iran Gov't Expects to Earn $750m From Cigarette Tax Next Year

EghtesadOnline: The government intends to earn 8,087 billion rials ($596.82 million) from tax on cigarette imports next year (March 2020-21).

News ID: ۷۸۵۱۲۱

11 December 2019

A total of 20,014 billion rials ($152.77 million) are also projected to be generated from tax on cigarette consumption, as per the next year’s budget bill.

President Hassan Rouhani submitted the government’s budget bill to the parliament on Sunday.

The government's operating budget for the upcoming fiscal year indicates an 8% expansion compared with the corresponding figure of the current year’s budget, according to Financial Tribune.

Yet, it's noteworthy to consider the inflation in Iran. The Statistical Center of Iran's latest report shows the average goods and services CPI in the 12-month period ending Nov. 21 increased by 41.1% compared with last year’s corresponding period.

Having said that, the next year's budget will be contractionary.

In view of budget constraints emerging from the imposition of unilateral US sanctions, the government has sought to reduce its spending while increasing its sources of income.

Taxation is considered one of the main sources of revenues for the Iranian government next year.

Tax earnings have been estimated to reach 1,982 trillion rials ($14.62 billion).

Cigarette Smuggling Halved

The Ministry of Industries, Mining and Trade estimates that 6.9 billion cigarettes were smuggled into Iran during the first half of the current Iranian year (March 21-Sept. 22), indicating a 53.2% decline compared with the estimated figure for last year’s similar period.

A total of 26.44 billion cigarettes were produced in Iran during the six-month period, registering a 34.6% growth compared with the corresponding period of last year, ISNA reported, citing the Ministry of Industries, Mining and Trade.

H1 cigarette exports saw a 76% decrease to stand at 36 million.

This is while tobacco increased more than ninefold to reach 931 tons during the period under review.

Iranians buy 100 trillion rials ($738 million) worth of cigarettes annually and spend 350 trillion rials ($2.58 billion) on treatment of smoking-related diseases, according to Associate Dean of Tehran Medical University Abdolrahman Rostamian.

Smoking is to blame for 90% of cancers, including lung cancer, as well as 25% of deaths due to coronary heart diseases.

“Although Iran has been a member of the World Health Organization Framework Convention on Tobacco Control for 12 years now, it fails to implement some of its articles, including the ban on selling tobacco products to persons under the age of 18,” Rostamian said.

“Over the past 10 years, tobacco consumption has increased from 2,000 tons to 15,000 tons per year. The government and parliament need to take effective measures on raising tax on harmful products, such as cigarettes.”

However, Director of Iran National Tax Administration Omid Ali Parsa says INTA has no intention to increase cigarette taxes.

Tax on domestically produced cigarettes in Iran stands at 20%. For foreign brands, the rate is at 30%.

A growing number of countries, including the Philippines, Brazil, Turkey and Uruguay, are showing the way. The Philippines, for example, raised taxes on all types of cigarettes more than fourfold in 2012. As a result, prices of the cheapest brands, accounting for about two-thirds of all cigarettes, rose by more than 50%.

In 2011-15, tobacco-tax revenues more than doubled, and the share of adults who smoked fell from 30% to 25%. By comparison, Britain took more than a decade to achieve the same change in smoking rates, the Economist reported.

“Heavy taxation is highly effective in reducing cigarette consumption. This approach has worked in poor countries as well as in rich ones and will work in Iran too,” the head of Tobacco Control Research Center of the Iranian Anti-Tobacco Association told Financial Tribune in an interview last year.

“There are about one billion smokers in the world, 80% of this population live in low- and middle-income countries. One out of 30 Iranian teenagers smokes cigarettes or hookah. One in 20 hospital beds in Iran are occupied by someone suffering from the adverse effects of smoking on their health. Smoking among Iranian teenage girls has more than doubled to reach 2.1% in recent years,” Nasir Dehqan added.

Noting that an average of seven million global deaths is attributed to smoking, the health mentor said, “In Iran, about 50,000 people die from cigarette-triggered illnesses annually. Iranians spend up to 80 billion rials [$635,000] on smoking daily. The point is smoking-attributed healthcare spending [hospital care, physician and clinical services, retail prescription drugs, etc.] is more than twice that figure. On the other hand, cigarette smoking causes premature death and lost productivity: life expectancy for smokers is at least 15 years shorter than for nonsmokers.”

Dehqan believes that as the success in rich countries has proved, a combination of taxes and public-health education would get people to stop smoking.

“Studies show a 10% rise in tobacco tax results in around 4% decrease in cigarette consumption in countries with high levels of per capita GDP and a 5% decline in low- and middle-income countries," he said.

“Cigarette tax stands at around 70% in 34 countries. Iran is among the 10% most affordable countries to smokers. It has been ranked the 181st expensive country in the world to buy cigarettes.”

Article 6 of the Framework Convention on Tobacco Control mandates effective taxes on tobacco products that lead to higher prices that not only help reduce consumption and demand, but also cuts governments’ healthcare costs associated with tobacco consumption. It recommends a big increase in cigarette tax to reduce consumption.

“Revenues gained on tobacco tax should be spent on preventing tobacco use, particularly among students,” Rostamian was quoted as saying by Mehr News Agency.

Domestic cigarette production meets more than 90% of demand in Iran.

Latest statistics also show 4,885 tons of cigarette paper worth more than $18 million were imported into Iran from 13 countries in the last Iranian year (March 2018-19).

According to data released by the Islamic Republic of Iran Customs Administration, Austria, Spain, Germany, Bulgaria, Turkey, the Czech Republic, the UAE, China, Switzerland, Vietnam and Philippines were the main exporters of cigarette paper to Iran during the period, Mizan Online reported.