Brazil Studies Reduction of Cigarette Tax to Curb Smuggling

By Contributing Reporter

RIO DE JANEIRO, BRAZIL – By the end of June, the Ministry of Justice (MJ) should decide on a tax reduction on cigarettes manufactured in Brazil. In March, an ordinance signed by Minister Sérgio Moro established a working group to assess whether tax changes would help “reduce the consumption of low-quality foreign cigarettes”.

The introduction of this group was criticized by health specialists and by sector agencies, including those linked to the Ministry of Health itself.

Professionals in the area affirm that the measure would not be sufficient to repress the illicit cigarette market, would contribute to the increase in the number of smokers and would entail costs.

The MJ said in a statement that it is studying “ways to reduce the consumption of smuggled cigarettes, without increasing consumption in Brazil”, and the government states that the ministries of Economy and Health were urged to participate in discussions.

The smoking decrease in Brazil is significant: the country has already met its global goal, which was to reduce the percentage of smokers in the population to 15 percent.

In 2017, the total number of smokers in the Brazilian population was 10.1 percent, according to the Ministry of Health. In 1989, according to the WHO, 34.8 percent of the Brazilian population smoked.

Researchers believe that a change in pricing policy would lead “smokers of illegal cigarettes to consume legal cigarettes.”

In addition, economists point out that the funds raised could be used for educational campaigns and that the measure would “reduce health spending” since illegal cigarettes are “of poor quality”.

Minister Sérgio Moro stressed that the reduction is a possibility and that nothing has been defined. Moro emphasized that the ordinance makes it clear that it is necessary to measure whether a tax reduction would increase global consumption.

According to the minister, it is estimated that more than 40 percent of the market is controlled by Paraguayan cigarettes, which are more health damaging than Brazilian cigarettes.

In Brazil, the taxation of the product has been increasing, and it is currently approximately 80 percent of the final price.