EU’s new tobacco products directive could cost Romania 19,000 jobs and EUR 200 mln in taxes

Romania is one of the EU countries which stand to lose the most if the proposed revisions of the current EU Tobacco Products Directive (TPD) will pass in the current for, according to a Roland Berger study commissioned by cigarette manufacturer Philip Morris. Up to 19,000 direct and indirect jobs could be lost locally and tax revenues generated by the industry could drop by up to EUR 200 million, according to the sudy.

At EU level the directive could generate 175,000 job losses and up to EUR 5 billion in lost tax revenue.

The main proposed revisions to the TBD are the introduction of pack standardization by making the use of large pictorial health warnings mandatory on cigarettes and roll-your-own tobacco (RYO) and increasing the surface covered by health warnings to 75 percent of the front and the back of the package compared to 25 percent at present, the ban of slim cigarettes and cigarettes, RYO and smokeless tobacco products with characterizing flavors.

EU authorities hope that these changes will help reduce tobacco consumption but manufacturers say the proposed measures could have the exact opposite effect.

The study stressed that pack standardization is likely to influence consumer behavior, resulting in downtrading to cheaper brands and growth in the illicit trade which already represents about 11 percent of cigarette consumption in the EU and which could grow by 25 to 55 percent under the TPD as a result of standardized packaging.

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Moreover, the ban on slim and menthol cigarettes would mean these products would only be available on the illegal market. This could mean an increase in annual sales of illicit cigarettes from 68 billion to 84-106 billion, says the report.

Countries where tobacco is cultivated and cigarette exporting countries will be the most affected. For example, in Poland, the TPD could cost up to 50,000 jobs and up to EUR 780 million in lost tax revenue. Bulgaria could lose up to 29,000 jobs, while in Greece annual tax revenue could decline by up to EUR 220 million, according to Roland Berger.

The new TBD could be adopted by the end of this year and is expected to produce effect by starting the end of 2014.

In Romania the cigarette industry has generated total tax revenues worth EUR 2.8 million, according to industry representatives.

Simona Bazavan