Excise hike threatens Romanian luxury producers

Related tags Romania

Romanian luxury products and beer producers say their survival is
threatened by the increase of the production and utilities excises
in the build up to the country's new Fiscal Code, yet analysts
believe consumer price rises are more likely, reports Bogdan

The new excise system is set to begin on 1 April, three months earlier than expected, and was adopted via the newly modified Romanian Fiscal Code adopted last week in Bucharest.

Average excises have already grown 13.5 per cent above the initially announced levels and this affects the business plans made at year-end 2004, approved at the beginning of this year by most producers of luxury goods and beer.

Some producers have told the local press that they may have to close production facilities as a result, but as Romania remains a producer-driven market, it is hard to say how much the businesses will actually be affected.

Analysts told www.Cee-FoodIndustry.com that they expect the higher excises to raise the consumer prices instead, generating a small rise in inflation at a maximum of 1.5% in April 2005.

Yet excises for ethylic alcohol grew from €280 per hectolitre to more than €465, threatening to force the closure of 50 smaller spirits makers, insisted employers' associations.

And the situation remains tense, with local producers forming a powerful lobby group to curb the new excise figures.

The early rise in excises nationwide, including excises on oil products and gas and utilities, was set to complement the effects of the 16 per cent flat tax adopted in this year's budget.

But the move has thrown the Romanian Ministry of Finance into a war of declarations with the local producers, even though ministry officials say the action will bring an extra €450 million to the state budget this year.

Some producers, including multinational cigarettes makers, said they may sue the Romanian Ministry of Finance by alleging up to four laws were not respected when the new Fiscal Code was approved.

These laws include a transparency law which requires the government to seek the advice of employers' organisations and producers associations before changing excises.

The beer producers should be the least affected. Excises for larger producers will rise from €0.60 to €0.74 per hectolitre instead of the assumed €0.65, albeit earlier than the expected start date of 1 July. Romania's two micro-breweries will see excises rise from €0.38 per hectolitre to €0.43.

Meanwhile, cigarette excises grew to €9.1 per 1,000 units, more than 30 per cent of the best-selling cigarette price - in Romania prices are at least seven times smaller than the EU average, the best-sold being the low-end price cigarettes, of some 0.5 - 0.7 euros a pack.

Related topics Market Trends

Related news

Follow us


View more