The French government bet on a 500 million Euro increase in tobacco taxes, and although it’s only autumn, the predictions have already been reached. Tobacco taxes were raised last March, when the price of cigarette packets was increased by an average of one Euro. This surtax has generated a significant amount of revenue for the government.
In 2017, the sale of tobacco helped fill the State’s coffers to the tune of 14 billion Euros. After initial estimations by the distributor Logista, this year, tobacco taxes have already increased by 415 million Euros compared to 2017 numbers. Projections suggest that by year’s end, this number will reach 600-700 million Euros.
The cigarette surtax, which has angered smokers, is intended to reduce tobacco consumption throughout the country. The bet paid off: tobacconist cigarette sales have dropped by 10% since the beginning of the year.
Tobacconists are the major beneficiaries of the tobacco surtax
Contrary to popular belief, tobacconists have been doing well in 2018. Despite the drop in sales, tobacconists have actually increased their overall profits by 50 million Euros, which is an average of 2000 Euros at each sales location.
The increase in profits is connected to negotiations carried out in 2016, when the tobacconist union managed to negotiate a better deal. A percentage on each sale rose from 7.5% to 7.7%, and will go up to 8% in 2021. A price increase of one Euro per packet is also planned for next year, which will further help tobacconists maintain their businesses despite the drop in total sales.
However, the seemingly good news should not belie the reality on the ground: the consistent price increases have added to a flourishing black market. A recent study revealed that 55.1% of cigarette sales in Marseille were made on the black market, which is seriously impacting legal cigarette sales.