World No Tobacco Day
Mehmet Şimşek
Minister of Finance
May 31, 2013
OUTLINE
1
Tobacco Market in Turkey
Tobacco Taxation System
Motives
Tools
Recent Changes in Tax Policy
Tax Burden on Cigare...
Tobacco Market in Turkey
3
Tobacco Market by Numbers in Turkey
$20 billion per year, spent on diagnosing and treating
health problems caused by tobac...
Unmanufactured Tobacco Production
(2011)
Source: Food and Agriculture Organization of the United Nations
2
243 72153 45
0
...
Tobacco Market in Turkey: Sales
Source: Tobacco, Tobacco Products and Alcoholic Drinks Market Regulation Board
2
4.4
4.6
4...
Tobacco Taxation System in Turkey:
Motives
7
Tobacco Taxation in Turkey
Motives
Limit
Consumption
of Tobacco
Products
Earn
Revenue
Limit Grey
Market
8
Limit Consumption of Tobacco Products
9
The global tobacco epidemic kills
nearly 6 million people each year
600 000 people...
10
Limit Consumption of Tobacco Products
Increasing price of
tobacco
through higher
taxes
Most effective way to incentiviz...
Increasing price of tobacco also helps
reduce
• relapse among those who have quit
• consumption among continuing users
• L...
10% price increase on a pack of cigarettes
could reduce demand for cigarettes by
about 4%
in high-income
countries
4% to 8...
Tobacco Consumption
Source: OECD
Note: For all other countries data belong to 2009 2
33.4
25.4
12
16
20
24
28
32
36
TURKEY...
Regulations also helped reduce Tobacco Consumption
Smoke Free Places
• All indoor workplaces, public places & cars
• Certa...
4.5
19.2
2
4
6
8
10
12
14
16
18
20 200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2*
15
Revenue: Tobacco Excise...
17
5.5%
6.1%
6.0%
6.5%
6.3%
6.5%
6.7%
7.0%
6.2%
7.2%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
2003 2004 2005 2006 2007 2008 2009 2010...
18
1.0%
1.1% 1.1%
1.2%
1.1% 1.1%
1.2%
1.3%
1.2%
1.4%
0.9%
1.0%
1.1%
1.2%
1.3%
1.4%
2003 2004 2005 2006 2007 2008 2009 2010...
Tobacco Taxation: Limit Grey Market
11
• Corruption
• Weak customs
• Slow judicial process
• Low penalties
• Lack of commu...
Cigarette Pricing in the Region (per average pack)
19Note: Price of a particular brand sold in the region
TOBACCO SMUGGLING-ACTION PLAN
• Revenue
Administration
• responsible for the
action plan
• works in cooperation
with relev...
TRACKING-TRACING SYSTEM
Stamp-Applied Product Tracking System for
Tobacco Products and Alcoholic Beverages
• System was in...
Non-Duty Paid Market
22
12.7%
19.8%
19.1%
20.0%
17.1%
13.4%
19.0%
10%
12%
14%
16%
18%
20%
22%
May-Jun Oct-Nov Apr-May Oct-...
Tobacco Grey Market
Global Adult
Tobacco Survey
(2012)
Non-tax labelled
cigarette rate is
9.1% in Turkey
23
Source: Minist...
Tobacco Taxation System in Turkey:
Tools
24
Types of Taxes on Tobacco Products
3
1-Value-Added Tax (VAT)
2-Excise Duty
6
Year
Excise Taxes (End of year) VAT
Burden
(%)
Total
Tax Burden
(%)
Ad Valorem
(%)
Minimum Specific Tax
Per Pack
2002 49...
Recent Changes in Tax Policy
Harmonization with the EU Acquis
Ad valorem excise with a specific tax floor
Mixed ad valore...
2013
(Ad Valorem + Specific Tax With Specific Tax Floor)
Excise Duty
VAT /
Retail
Price (%)
Total Tax
/Retail
Price (%)
Sp...
Tobacco Taxation System in Turkey:
Tax Burden
29
14
64.8
81.8
60
65
70
75
80
85
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Tax Burden on Cigarettes (VAT +...
Source: Eurostat (1 January 2013)
13
89.0
88.0
87.2
85.2
84.6
83.9
83.7
83.5
83.5
82.4
82.3
81.8
81.4
81.3
80.6
80.6
79.9
...
Thank you
32
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Fiscal policies on tobacco products v5 31.05.2013

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Fiscal policies on tobacco products v5 31.05.2013

  1. 1. World No Tobacco Day Mehmet Şimşek Minister of Finance May 31, 2013
  2. 2. OUTLINE 1 Tobacco Market in Turkey Tobacco Taxation System Motives Tools Recent Changes in Tax Policy Tax Burden on Cigarette Excise Duty on Tobacco
  3. 3. Tobacco Market in Turkey 3
  4. 4. Tobacco Market by Numbers in Turkey $20 billion per year, spent on diagnosing and treating health problems caused by tobacco use $ 20 billion per year, spent by smokers on cigarette purchases 86.7 TL per month, spent by smokers on cigarette purchases in 2010 12.7% of minimum wage, spent by smokers on cigarettes 4 Source: WHO’s Global Adult Tobacco Survey (GATS), Haceteppe University
  5. 5. Unmanufactured Tobacco Production (2011) Source: Food and Agriculture Organization of the United Nations 2 243 72153 45 0 1,000 2,000 3,000 4,000 5,000 China India Brazil US Malawi Argentina TURKEY2002 Indonesia Tanzania Zimbabwe Pakistan Italy Bangladesh NorthKorea Thailand Zambia VietNam Mozambique TURKEY Philippines Bulgaria Production (Int $mn) Production (BT)
  6. 6. Tobacco Market in Turkey: Sales Source: Tobacco, Tobacco Products and Alcoholic Drinks Market Regulation Board 2 4.4 4.6 4.8 5 5.2 5.4 5.6 10 15 20 25 30 35 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total Revenues (bn TL, lhs) Total Sales (Bn Packages, rhs)
  7. 7. Tobacco Taxation System in Turkey: Motives 7
  8. 8. Tobacco Taxation in Turkey Motives Limit Consumption of Tobacco Products Earn Revenue Limit Grey Market 8
  9. 9. Limit Consumption of Tobacco Products 9 The global tobacco epidemic kills nearly 6 million people each year 600 000 people each year die from breathing second-hand smoke.
  10. 10. 10 Limit Consumption of Tobacco Products Increasing price of tobacco through higher taxes Most effective way to incentivize people quit smoking
  11. 11. Increasing price of tobacco also helps reduce • relapse among those who have quit • consumption among continuing users • Likelihood of teenagers to start smoking 11 Limit Consumption of Tobacco Products
  12. 12. 10% price increase on a pack of cigarettes could reduce demand for cigarettes by about 4% in high-income countries 4% to 8% in low- and middle- income countries 12 Limit Consumption of Tobacco Products
  13. 13. Tobacco Consumption Source: OECD Note: For all other countries data belong to 2009 2 33.4 25.4 12 16 20 24 28 32 36 TURKEY2006 Greece Chile Hungary Spain Korea TURKEY2010 Poland Japan Italy Netherlands Germany UnitedKingdom Norway Israel SlovakRepublic Denmark Luxembourg Finland Canada UnitedStates Iceland Sweden %ofpopulation15+whoaredailysmokers
  14. 14. Regulations also helped reduce Tobacco Consumption Smoke Free Places • All indoor workplaces, public places & cars • Certain outdoor areas where cultural, artistic, sports, or entertainment activities are held A Comprehensive Ban on Tobacco Advertising, Promotion & Sponsorship A Composite warning on Tobacco Packaging and Labeling • Full-color pictorial warnings & texts, occupying no less than 65% of the surface area 14
  15. 15. 4.5 19.2 2 4 6 8 10 12 14 16 18 20 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2* 15 Revenue: Tobacco Excise Duty Collections(BillionTL)
  16. 16. 17 5.5% 6.1% 6.0% 6.5% 6.3% 6.5% 6.7% 7.0% 6.2% 7.2% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (%,TotalTaxRevenues) Revenue: Tobacco Excise Duty Collections
  17. 17. 18 1.0% 1.1% 1.1% 1.2% 1.1% 1.1% 1.2% 1.3% 1.2% 1.4% 0.9% 1.0% 1.1% 1.2% 1.3% 1.4% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (%,GDP) Revenue: Tobacco Excise Duty Collections
  18. 18. Tobacco Taxation: Limit Grey Market 11 • Corruption • Weak customs • Slow judicial process • Low penalties • Lack of communication and collaboration between neighboring countries Taxes may create financial incentives for those who engage in illegal activities, because of
  19. 19. Cigarette Pricing in the Region (per average pack) 19Note: Price of a particular brand sold in the region
  20. 20. TOBACCO SMUGGLING-ACTION PLAN • Revenue Administration • responsible for the action plan • works in cooperation with relevant institutions (Ministry of Justice, Ministry of Foreign Affairs, Ministry of Economy, Ministry of Internal Affairs...) Action Plan to Combat Smuggling of Tobacco and Tobacco Products (2011-2013)
  21. 21. TRACKING-TRACING SYSTEM Stamp-Applied Product Tracking System for Tobacco Products and Alcoholic Beverages • System was initiated July 24, 2007 • November 5, 2007 tobacco products and alcoholic beverages sales without stamp were banned
  22. 22. Non-Duty Paid Market 22 12.7% 19.8% 19.1% 20.0% 17.1% 13.4% 19.0% 10% 12% 14% 16% 18% 20% 22% May-Jun Oct-Nov Apr-May Oct-Nov Mar-Apr Sep-Oct Mar-Apr Q2: Q4: Q2: Q4: Q2: Q4: Q1: 2010 2010 2011 2011 2012 2012 2013 Source: Empty Pack Survey by MS Intelligence
  23. 23. Tobacco Grey Market Global Adult Tobacco Survey (2012) Non-tax labelled cigarette rate is 9.1% in Turkey 23 Source: Ministry of Health, 2012
  24. 24. Tobacco Taxation System in Turkey: Tools 24
  25. 25. Types of Taxes on Tobacco Products 3 1-Value-Added Tax (VAT) 2-Excise Duty
  26. 26. 6 Year Excise Taxes (End of year) VAT Burden (%) Total Tax Burden (%) Ad Valorem (%) Minimum Specific Tax Per Pack 2002 49.5 15.25 64.8 2003 55.3 15.25 70.6 2004 28 Plus 0.35 – 1.00 TL 15.25 71.6 2005 58 or 1.20 TL 15.25 75.5 2006 58 or 1.20 TL 15.25 74.6 2007 58 or 1.55 TL 15.25 73.5 2008 58 or 1.55 TL 15.25 73.3 2009 58 or 2.05 TL 15.25 74.1 2010 63 or 2.65 TL 15.25 78.5 2011 65 or 2.90 TL 15.25 79.3 2012 65 or 2.90 TL 15.25 80.3 Tax Burden on Cigarettes (Per Pack)
  27. 27. Recent Changes in Tax Policy Harmonization with the EU Acquis Ad valorem excise with a specific tax floor Mixed ad valorem and specific excise with a specific tax floor Periodic Increases 7
  28. 28. 2013 (Ad Valorem + Specific Tax With Specific Tax Floor) Excise Duty VAT / Retail Price (%) Total Tax /Retail Price (%) Spesific Tax per Pack Ad Valorem (%) Minimum Specific Tax Per Pack 0.09 TL 65.25 3.15 TL 15.25 81.79 10 Note: On average, a pack of cigarette costs 7 TL in Turkey
  29. 29. Tobacco Taxation System in Turkey: Tax Burden 29
  30. 30. 14 64.8 81.8 60 65 70 75 80 85 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Tax Burden on Cigarettes (VAT + Excise Duty) (%,RetailPrice)
  31. 31. Source: Eurostat (1 January 2013) 13 89.0 88.0 87.2 85.2 84.6 83.9 83.7 83.5 83.5 82.4 82.3 81.8 81.4 81.3 80.6 80.6 79.9 79.8 78.4 77.7 77.5 77.4 76.8 76.4 76.4 76.3 75.9 72.1 64.8 60 65 70 75 80 85 90 95 UnitedKingdom Greece Netherlands Hungary Poland Estonia Ireland Bulgaria Slovakia Slovenia Romania TURKEY(2013) Finland Latvia France Denmark Spain Portugal Lithuanian CzechRepublic Malta SouthernCyprus Belgiu Germany Austria Sweden Italy Luxembourg TURKEY(2002) %ofRetailPrice Tax Burden on Cigarettes (VAT + Excise Duty, 2013)
  32. 32. Thank you 32

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