16.03.2025 19:22
The excise tax rate and fixed tax amount for cigarettes have been redefined. According to the regulation, due to a 1 lira increase in costs, the necessary increase in cigarette prices is now 3.8 lira instead of 4.4 lira. To compensate for the "decrease in tax revenues" resulting from this reduction, the fixed tax amount has been increased.
The special consumption tax (SCT) rate on cigarettes has been changed along with the fixed tax amounts, and adjustments have been made to the composition of the SCT. The Presidential Decision regarding the matter has been published in the Official Gazette and has come into effect.
SCT DECREASED, FIXED TAX AMOUNT INCREASED
With the decision, changes were made to the composition of the SCT in a way that would not lead to any changes in tax revenues. In this context, while a reduction was made in the SCT rate on cigarettes, an increase in the fixed tax amount was implemented to compensate for the decrease in tax revenues resulting from this reduction. It was reported that the adjustment aimed to support the fight against inflation as a fiscal policy, while the multiplier effect of cigarettes was reduced from 4.4 to 3.8. Thus, due to a 1 lira increase in costs, the amount of increase that should be made in cigarette prices became 3.8 lira instead of 4.4 lira. It was noted that this was a step in fiscal policy taken in line with the budget target to limit the inflationary effect.
INFLATION ADJUSTMENT FOR CIGARETTES
The cigarette tax system creates a significant inflationary effect due to the high relative tax, which is a price-dependent tax element, and consequently the high fiscal multiplier. High relative tax rates that depend on price increase the 'fiscal multiplier', which shows how many times cost increases will be reflected in prices. When the high fiscal multiplier causes costs to be reflected in sales prices, it negatively affects inflation even more.
ACCOUNTING FOR 21% OF TOTAL SCT REVENUES
According to the Ministry of Treasury and Finance data, the SCT revenue from tobacco products in 2024 reached 309 billion TL, an increase of 75% compared to the previous year. It is noteworthy that this increase in cigarette SCT revenues is higher than the total tax revenue increase (62%) or the total SCT revenue increase (56%). The SCT revenue of 309 billion TL obtained from tobacco products accounts for 21% of total SCT revenues and 4% of total tax revenues.