According to MF daily, new Finance Minister plans to soften cigarette excise tax hike proposed by previous government. He plans to increase excise tax only to the minimum level required by EU agreements. Additionally he counts with limiting hoarding activities ahead of excise tax hike.
Our view:
We see this effort to arrive slightly late as Parliament will vote today on excise tax hike proposal as introduced by Social Democrats and majority of political parties are prepared to support it. This proposal counts with minimal tax of CZK 1.75/piece in comparison to current level CZK 1.36/piece applied on cheaper brands and CZK 0.85/piece + 32% of retail price in comparison to current level CZK 0.73/piece + 25% of retail price applied on more expensive brands. Current excise tax hike proposal doesn’t include any limitation of hoarding efforts. Although we see the chances of passing lower excise tax hike than proposed as weak, we give hoarding effect limitation much higher probability and view it as positive. Note however that current government still need to win a confidence vote on October 4, thus any efforts should be taken with certain limitations.