The Messenger, Georgia
Dec 28 2004

Cigarette smuggling may increase in 2005
By M. Alkhazashvili

Some Georgian experts have said that the influx of smuggled
cigarettes into country will increase in 2005 as a result of the new
tax code which envisages an increase in excise tax on cigarettes. The
state authorities, however, dispute such claims and maintain that in
spite of the increase in tax, contraband will not increase.

According to the new tax code, the excise on tobacco products will
become a major source of budgetary revenue. It increases the excise
tax on imported filter cigarettes from 40 to 90 tetri, and from 25 to
70 tetri on local brands. The excise on imported non-filter
cigarettes will increase from 7 to 25 tetri and from 5 to 15 for
local brands.

After these changes are implemented, the price of tobacco in Georgia
will be much higher than in our neighboring countries. In Armenia
cigarettes will be twice as cheap and in Azerbaijan, four times
cheaper. This will, some experts warn, will encourage the smuggling
of cigarettes from neighboring countries.

If one considers that controls against smuggling still remain an
“Achilles’ heal” of customs and taxation offices, the experts argue,
the chances are great that this will happen. Alongside the well
established tradition of smuggling from Russia, Georgia could witness
a similar problem coming from its South Caucasian neighbors.

The government, however, does not agree with such prognoses.
According to Deputy Finance Minister Zurab Anteladze, cigarette
smuggling will not increase because the situation is “very much under
control.” He considers that the administration of customs and tax
offices are well equipped to handle such problems and that there is
no threat in this area.

Meanwhile, the Georgian authorities are taking preventative measures.
Excise Service Head Davit Giorgadze warned local cigarette
manufacturers at a press conference on December 24 that if non-filter
cigarettes have illegal excise stamps, they will be removed from the
market. Second-hand usage of excise stamps will be very strictly
prosecuted, he added.