Published on July 3, 2008
In the USA owners of tobacco shops are worried about future of their businesses, due to the dramatic increase of taxes on tobacco products that was approved last week by the House.
It is expected that the new included tariff can push off thousands of small retailers out of business along with substantial job losses in Latin American countries that produce and export the majority of cigars sold in the US.
On Thursday a bill was approved, which increases taxes more than twice on large cigars, most of which are premium cigars, to 44.6 pct, up from the current level of 20.7 pct. This increase will impose the US retailers to double or even triple prices of tobacco products. So, cigar that in past cost 4 USD, now it can cost for about 12 USD. Difference is quite sensible.
If prices will be so high, the number of customers will reduce, event what can affect businesses of about 3,600 specialty tobacco retailers.
“If this happens, expect a great number of these family-owned cigar shops to close, “McCalla said of the legislation. McCalla's group includes about 2,000 small retailers as members.
Also, prices on all cigar inventories maintained by tobacco shops will rise. This makes situation more difficult for retailers, for the reason that it serves as additional hit to merchants’ business.
So of course, US cigars’ traders would reduce import of tobacco products from Latin America countries.
“This would have a devastating impact on Nicaragua, Honduras and the Dominican Republic, which have tens of thousands of people working in the tobacco industry,” said Norman Sharp, the president of the Cigar Association of America.
Cigarette producers also don’t meet the increase of the taxes on cigarettes with great enthusiasm. Philip Morris USA, number one in the USA, RJ Reynolds, second US tobacco producer and Loews Corporation, also a great producer and seller of cigarettes have already publicly called on Congress to reject a tax hike on cigarettes.
“Between federal, state, and local taxes and tobacco settlement payments, government entities raked in more than 33 bln USD from smokers in 2006,’ according to a notice on RJ Reynolds’ website. “Why should 20 pct of the adult population be forced to pay even more?”
