Tobacco taxation

Tobacco taxation

Currently, some 76% of the retail price of cigarettes goes directly to the state. This means that tobacco companies like JTI make a significant contribution to tax revenue. In Austria, this amounts to a total annual payment of around EUR 2.1 billion in 2023, making tobacco tax second in terms of generating excise tax revenue for the state after petroleum tax.

The current model for calculating the amount of tax is complex. The excise tax on cigarettes is calculated on the basis of a mixed tax rate, consisting of two components: a specific tobacco tax rate (as of 1 April 2024 EUR 80.0 per 1,000 units of cigarettes) and a variable tobacco (ad-valorem) tax rate (as of 1 April 2024 32.0% of the retail sales price1).

 In 2018, a tax model came into force that brought a decrease of the ad-valorem tax rate and an parallel increase of the fixed rate per 1,000 units. This kind of tobacco tax model, that includes a decrease of the ad-valorem component, was subsequently implemented for the following years. As of 1 April 2024 the next step of such a model enters into force, continuing the successful concept of ad-valorem decrease until 2026.

However, the high taxation on tobacco has many consequences, including the illegal import of products from abroad. That is why it is important for the government to take the expertise of tobacco manufacturers into account when developing a market-friendly taxation model.

Ralf-Wolfgang Lothert, Director of Corporate Affairs & Communication of JTI Austria, said: "A multi-year excise tax model for tobacco products allows companies, trade as well as the Republic to plan strategically and long-term."

Calculation example with a retail price of EUR 6.20 (pack of 20 cigarettes)2:

Tobacco tax EUR 3.58
VAT EUR 1.03
Trade margin (tobacconist)3 EUR 0.84
Industry incl. wholesale trade EUR 0.74


1 The retail price is the price set by the manufacturer for individual cigarettes, cigars and cigarillos and for packs of smoking tobacco
2 As of April 2024
3 The profit margin for tobacconists is regulated by statute in Section 38 of the Tobacco Monopoly Act

 

 

 

A multi-year taxation model for tobacco products allows companies to plan strategically and long-term
Ralf-Wolfgang Lothert, Director Corporate Affairs and Communication