New law to discourage smoking could threaten Georgia’s public budget

Sulkhan Bordzikashvili/OC Media

The Georgian Parliament is considering tough new laws against smoking. However, with excise duty on cigarettes going up, smoking is becoming even more profitable for the government’s budget.

People have marked Georgia Without Tobacco day on 29 March every year since 1996. Usually the events planned on this day every year is dedicated to raise people’s awareness about the importance of a tobacco free environment.

This year, the National Centre for Disease Control and Public Health (NCDC) introduced a package of legislative amendments regarding tobacco control in Georgia at Tbilisi State Medical University. The package of amendments will establish some restrictions on smoking, but will not increase the prices of tobacco products.

Prices for tobacco products in Georgia have increased by five times over the last five years. The government has justified the increases with economic reasons, protection of people’s health, and international obligations.

The government expects to see increased revenues in the budget from excise duty on tobacco. According to the Ministry of Finance, in 2016, excise duty on tobacco amounted to ₾549 million ($224 million) with an additional ₾200 million ($82 million) coming from VAT on tobacco products.

The ministry says that they expect to receive an additional ₾200 million this year from excise duty, which on top of VAT, could top ₾1 billion.

The price of tobacco products increased in January 2017, with filtered cigarettes increasing by ₾0.60 ($0.24) and non-filtered cigarettes by ₾0.30 ($0.12). Georgia adopted the Law on Tobacco in 2003, and it has been amended several times since then. However, the package of amendments currently being proposed foresees more radical measures.

Guguli Maghradze, an MP for the ruling Georgian Dream party, submitted the draft to parliament. She explained that with this new law, Georgia aims to fulfill its international obligations, including directives and recommendations within the Association Agreement, which Georgia signed with the EU in 2014.

The new law will apply following restrictions:

  • It will be prohibited to smoke in public areas (restaurants, bars, stadiums, etc.);
  • All marketing and advertising activities for tobacco products will be banned;
  • It will be prohibited for stores to place tobacco products in visible spots;
  • 65% of the area of packaging must contain messages about the harmful effects of tobacco (up from the current 30%);
  • Public officials will be prohibited from meeting with tobacco companies;
  • The responsibility for the damage caused by consumption and production of tobacco will be imposed on tobacco companies;
  • Tobacco companies will be prohibited from spending money on cultural or social programmes;

The authors of the bill believe that it will reduce consumption of tobacco in the country, using the example of neighbouring countries.

Turkey adopted similar restrictions in 2008, and the number of smokers declined between 2008–2012 from 31% to 13% of the population. In Ukraine, the number of smokers declined from 26% to 22% after passing the amendments in the same period.

The Association of Young Financiers and Businessmen, a think-tank, issued a statement on this issue claiming that the draft law has many shortcomings and that it will not bring any real results.

‘If we really want to reduce the number of smokers, we should implement educational, awareness policy, as it happened in the other countries, but not by making the product expensive’, the statement reads.

The ISET Policy Institute, a think-tank, also published an article about the draft law, writing that the government should work on a strategy. They proposed three steps for the government after passing the law:

  • ‘First, increased prices have to be accompanied by strategies to mitigate any adverse consequences on low socioeconomic status population and heavy and/or long-term smokers.’
  • ‘Second more aggressive control of contraband cigarettes is needed to make tobacco taxation more effective in the future.’
  • Third, the government should keep in mind that once the price hike reaches a certain level, the tax revenues from cigarettes may start to drop.’
(Sulkhan Bordzikashvili/OC Media)

Accompanying the stricter regulations, more attempts to smuggle tobacco products without paying excise duty have been discovered. For example, on 24 March, border-guards at the Sadakhlo border check-point with Armenia seized 8,400 units of illegal cigarettes.

According to local daily Resonansi, from 1January to 20 February the Revenue Service discovered 33 cases of undeclared imports of cigarettes, totalling 400 cartons, with a total value of ₾23,000 ($ 9,000).

The government increased the price on cigarettes for the first time in 2013, The by 25%.

According to the European School Survey Project on Alcohol and Drugs, in 2015, 43% of children under 16 had smoked at least once. The figure is higher among boys (54%) than in girls (30%).

Twelve percent of Georgian schoolchildren are regular smokers, with 4% of schoolchildren claiming to have began smoking before turning 13.

According to the NCDC, 11,000 people die in Georgia every year due to smoking tobacco. The World Health Organisation puts the global death toll from smoking at around 6 million people every year.