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Cigarettes in Germany increase in price again. Part 1
November 8, 2010
Government of Federal Republic of Germany decided during the nearest four years step-by-step to increase tax on tobacco products. It was increased earlier as well, what, however, hasn't led in the past to budget revenue growth, rather, on the contrary.
Under the pressure of industrial lobby Federal Republic of Germany government has given up their own plans to revoke tax benefits for especially energy-intensive enterprises. Such a measure was a part of large campaign of German state budget recovery.
As compensation, however, was decided to increase tobacco excise taxes gradually. By means of such measure Federal Republic of Germany government expects to get additionally 200 millions euro next year, 500 millions - in 2012, 700 millions - in 2013 and 800 millions in 2014.
In the beginning of 1970 years American economist Arthur Laffer has drawn on the napkin in on of Washington restaurants primitive diagram in order to demonstrate his interlocutors' thesis about nonlinear relation among tax rates and tax revenues. From that time the picture began to be named "Laffer curve" and has brought his author world fame.
The main point of this thesis consists in the following: tax rates cannot be increased endlessly trying to obtain increase of budget revenue. At some moment, having reached apogee, curve of tax revenues breaks and begins to slip down - to zero.
"Laffer curve" is fully applicable to history of tobacco excise tax increase in Federal Republic of Germany in the middle of current decade. With notable leaps it was increased five times during three years. As result, however, appropriate item of income in state budget has even decreased from 14.1 billions in 2003 to expected 13.3 billions in 2010. Some, for spite of the government have quit smoking at all; others began to smoke roll-ups, others - counterfeit products that is presented in Germany more than enough.
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