By Ruzanna Khachatrian
The Armenian parliament approved a government initiative to raise by 10 percent the tax on imported cigarettes on Monday following a strong lobbying campaign by the domestic tobacco industry.
Importers, including Phillip Morris and other Western tobacco multinationals, will have to pay $110 for every “case” (500 packs) of cigarettes beginning from July 1. Local companies will continue to pay $80.
The measure, backed by a vote of 87 to five, is intended to shore up local companies which claim to have suffered losses since the authorities narrowed the difference in taxation of Armenian and foreign tobacco products in April 2000.
“The government is taking this step for a single purpose: to spur local production so that local manufacturers can expand their production and pay more taxes to the state budget,” Minister for State Revenues Andranik Manukian told deputies.
The Grand Tobacco Armenian firm, which accounts for more than half of cigarette sales in Armenia, has long been pushing for the increase in an effort to improve its competitive position. In a written message to the government, the company pledged to increase production by 50 percent and to avoid raising prices.
Grand Tobacco, which is mostly owned by Hrant Vartanian, one of Armenia’s richest men, argues that by protecting the domestic industry against foreign competition the authorities will save thousands of jobs in the unemployment-stricken economy. Official figures put the number of people employed by cigarette factories in Armenia at 2,500. Some 12,000 rural households are said to earn a living mainly by growing and selling tobacco.
Government officials estimate that the measure will bring two billion drams ($3.6 million) worth of additional revenues to the state budget this year.