“We have prepared a new plan taking into account the trends in the market for excise goods, prices, changes in consumption and their drivers, excise policy in the EU countries and potential impact on the shadow market. We maintain and continue the format of the three-year plan that ensures policy stability and predictability, coherence with public expenditure and its demand. It also allows businesses to prepare for future changes in advance”, stated Minister of Finance Gintarė Skaistė.
The new excise plan aims through tax measures to reduce the affordability and consumption of alcoholic beverages and tobacco products as well as their alternatives, in particular, among young persons and thus to contribute to the implementation of public health policy objectives and to maintain non-decreasing excise share in the structure of tax revenue. The three-year excise plan aims to maintain a relatively stable excise share in price in altering price of product.
Currently, the new plan is submitted for public review and proposals. After its adoption in the Seimas, the amendments would come into effect on 1 January 2025.
A moderate alcohol excise policy is proposed
The new excise plan aims to regularly reduce differences in taxation for 1 degree of alcohol in drinks of different strengths as compared to the most heavily taxed ethyl alcohol.
Statistical data shows that in recent years the consumption of alcohol fell down, as compared to the growth in 2020–2021. With increasing prices of alcohol faster than fee factors – the growth rate of affordability slowed down.
In order to disturb the balance of the market and not to create incentives for the shadow economy, a further moderate excise policy is being established.
Looking ahead to 2025-2027, excise duty on ethyl alcohol, intermediate products with a strength of more than 15 % is expected to grow by 5 % each year, on wine and other fermented beverages, beer – 10 %. Its growth for intermediate products with a strength of up to 15 % is expected to be on average 18 %. Though the percentage increase in excise duty on wine and beer would be higher than on ethyl alcohol, the impact of the increase in excise duty on prices of these products in euro would be lower (in terms of the same quantity of alcoholic beverage).
It is estimated that due to changes in excise duty, the price of 0.5 litre of beer could increase on average by about EUR 0.03 cents next year, the same amount of wine of more than 8.5 % strength – about 0.13 cents, and 0.5 litre of spirits – about 0.26 cents.
Alternative products replace cigarettes
Statistical data shows that in 2023 the affordability of cigarettes and alternative heated tobacco products increased by about 4 % due to strong average wage growth. In 2023, for the average monthly net wage it was possible to purchase 280 packets of cigarettes, when in 2022 – 269 packets and in 2021 – 254 packets.
Also, market development trends are observed – starting from 2017 sales of cigarettes kept decreasing steadily and alternative tobacco products, i.e. cigars and cigarillos, smoking tobacco, e-cigarettes, in particular, heated tobacco products, were gaining popularity on the market. In 2021–2023 the market share of heated tobacco increased from 22.6 % to 33 %.
It should be noted that one of the reasons for growing demand for heated tobacco was an attractive price, which remained competitive as compared to that of cigarettes. In 2023 the excise share in the price of heated tobacco was 28.8 % or more than twofold lower than in cigarettes, where the excise in their price constituted 60.8 %. Taking into consideration the tobacco market trends, the sales of cigarettes are likely to further fall each year, while sales of heated tobacco products – to grow.
Statistics shows that Lithuania is leading in Europe in terms of consumption of the heated tobacco. Therefore, the decisions on the size of excise duty in this category are based on traditional cigarettes replacement aspect and the endeavour to maintain the non-decreasing level of revenue from smoking products, measuring in percentage from the gross domestic product.
In the 2025–2027 perspective, it is suggested to maintain the policy line on excise duty for cigarettes by foreseeing the annual growth of 7 %, for cigars and cigarillos – 14 %, smoking and raw tobacco – 7.8 %, heated tobacco and alternative products – about 11 %, while for e-cigarette liquid – approximately 30 %.
It is estimated that next year the implemented amendments to the excise plan could rise prices of cigarettes by 0.21 cents per 20 units, cigars and cigarillos – 0.32 cents per 20 g, smoking tobacco – 0.21 cents per 20 g, heated tobacco and alternative products – 0.21 cents per 20 units. The price of e-cigarette liquid could increase by 0.19 cents per 2 ml of liquid.
The implemented proposed plan on alcohol and tobacco and alternative products is expected to generate EUR 39.4 million of additional revenue to the State budget in 2025, and after three years the budget revenue would be higher by about EUR 126.7 million, thus maintaining a relatively stable excise share in the structure of tax revenue.
