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‘Decidedly Criminal’: Tobacco giant has sent cheap cigarettes to market despite tax increase

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Tax evaders face sharp criticism from members of parliament and tax experts.

You may have wondered yourself. Why can you still buy cigarettes for 37.5 kroner, five months after the new tax increase should have brought the price up to fifty?

Until now, the answer has been that wholesalers and stores have stocked up on old cigarettes and are selling out of inventory.

The rules are designed in such a way that cigarettes sold to wholesalers before 1 April 2020 may be sold at the old price. After that date, the trap is set and the smokers must be sold at the new VAT and tobacco tax, which is 42 percent higher.

It is a small tax mark that determines what tax there is on cigarettes, and it is the manufacturer’s responsibility to ensure that it is the right mark that sits on the cigarettes.

On April 1, the tax increased , and therefore, from that day on , manufacturers had to put new brands on all the cigarettes they passed on to wholesalers and shops.

But DR News can today document how the tobacco manufacturer Japan Tobacco International, in violation of the rules, has sent cigarettes with old tax marks on the market, after the price increase was introduced on 1 April.

– Your documentation shows that they are breaking the law. They have committed something that is decidedly criminal, says Torben Bagge, who is a tax lawyer at TVC Advokatfirma.

When Japan Tobacco sells its products in the kiosks at a lower price than the competitors, then they have the opportunity to increase their market share. This is the assessment of Jurre Thiel, assistant professor at Copenhagen Business School and expert in pricing strategies.

– This phenomenon is called price penetration. If Japan Tobacco can sell their products cheaper, then it will improve their position in the market, he explains.

Tracking system uncovers tax fraud

DR News has visited 12 kiosks and found old-price Camel cigarettes from Japan Tobacco in 11 of them.

We have since asked the Danish Safety Technology Authority to trace 40 cigarette packs – sold for the old tax – from Japan Tobacco.

The tracking shows that 36 out of 40 packages have been sold for the old tax after the tax increase on April 1 – the last four you can not see where it ended. The cigarette packs have arrived on the shelves in the kiosks and shops at old prices in June, July and most of the time into August.

But it is against the rules, says Jette Thygesen, who is one of Denmark’s leading researchers in tobacco taxes.

– The early taxation is illegal. When the manufacturer sends it away, the cigarette pack must be taxed – and not before, she says.

In the graphic here you can see what it looks like when you track a package of Winston Original 100 from Japan Tobacco sold for old tax . The tracking shows that the cigarette package came on the market in August with the old tax mark – four months after the tax increase.

READ FULL STORY HERE:

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