Cigarette Taxes Encourage Smuggling In Turkey

January 6, 2015 Taxation in Turkey

ISTANBUL – Tax hikes on cigarettes in Turkey are helping increase the demand for smuggled cigarettes from Iraq and Syria.

In a written statement issued on January 2nd the head of the Confederation of Turkish Craftsmen and Tradesmen (TESK) Bendevi Palandöken claimed that the annual increases to the rate of taxes on cigarettes and alcohol need to be frozen, as the hikes are leading to an increase in the smuggling.

At the start of the year the tax applied to the sale of tobacco products was increased from TRY 0.13 per pack of cigarettes, to a rate of 0.1866 per pack of cigarettes, while the rate of tax on beer and wine was hike by 15 percent and 16 percent respectively.

According to Bendevi Palandöken, the increases in tax rates will result in one quarter of all cigarettes in the country being smuggled, a situation which will hurt economic activity, the health of the population, small businesses, and will reduce the collection of tax revenues.

The rate of smuggling of tobacco products in Turkey has seen a significant rise in the last several years, as in 2010 16.3 percent of cigarettes were smuggled, while in late 2014 the rate had jumped to 20.3 percent.

Some taxation experts have indicated that the high tax burden placed on cigarettes in Turkey means that the price of an average pack of cigarettes now sits at more than twice the price seen in neighboring Syria, Iran and Iraq, and the money derived from smuggling often flows back into those countries.

Photo By: Partha S. Sahana