Philip Morris: Parliament approved tobacco tax increase On Friday, the Chamber of Deputies passed an amendment to the excise duty law, raising the tax on tobacco products as of June 1 and again on January 1, 2006. The amendment is still subject to Senate approval and the president's signature. This year the tax is to increase to CZK 0.60 per cigarette plus 0.24% of the cigarette retail price from the current CZK 0.48 and 0.23%. Moreover, the minimum per-cigarette tax rate should rise from the current CZK 0.94 to CZK 1.13 in 2005 and CZK 1.36 in 2006. This means that the price of cigarettes will increase on average by CZK 6 per pack this year and by CZK 7 in 2006. By 2007 excise tax should form 57% of the retail price. The tax cannot fall below EUR 60 per 1 000 cigarettes, this limit should rise by another EUR 4 in 2008. However, the European Commission is to meet before 2006 and discuss the cigarette excise tax increase for 2007/2008. Several EU countries (Portugal, Spain) are already claiming that it would not be feasible to increase the excite tax as planned and will push for fewer increases or increases over a long period. The excise tax increase in 2005/2006 would inevitably lead to lower cigarette consumption; the effect should be softened by expected hoarding ahead of the hikes. In addition, PMCR has already launched cheaper brands to offset expected drops in sales of high-price cigarettes. Though negative, the news was expected and should have no major impact on the Philip Morris stock price as already quoted. Source: CTK