Poles promise cigarette tax rise within three years of joining EU

Date: 12/04/01

By Simon Taylor

POLAND has agreed to raise its cigarette taxes to high EU levels three years after it joins the Union.

The decision comes despite predictions that the move could damage public support for EU membership in Poland and stoke a major smuggling problem on the country's borders with poorer former Soviet states.

Warsaw's chief negotiator Jan Kulakowski has told his EU counterparts that Poland is prepared to increase the share of excise duty on the sale price of cigarettes to 57% within three years of joining the Union. Poland had requested a five-year delay before bringing its tax rates into line with the EU.

Polish diplomats said Warsaw's willingness to take difficult decisions shows it is prepared to be flexible in order to speed up enlargement negotiations.

Addressing a meeting of MEPs in Brussels this week, Kulakowski called on EU governments and the European Commission to show the same readiness to compromise to restore dynamism to the enlargement process.

"Compromises must not boil down to unilateral concessions," he said. "Compromises can only be achieved in an atmosphere of mutual understanding. We look forward to seeing similar flexibility from the Community so we can move onto the final phase of the negotiations as soon as possible."

Kulakowski warned that unless member states give applicant countries recognition for the progress they have made soon there could be a backlash. This week the six chief negotiators from the leading applicant states criticised the EU for the slow pace of enlargement negotiations.

Polish diplomats believe the cigarette tax decision could provoke a strong public reaction because it would mean a massive hike in retail prices of cigarettes.

Scepticism about the advantages of EU membership is already stronger in Poland than in other applicant countries, with 68% of the population recently saying they would rather delay joining than be forced to make difficult reforms.

They also warned that the move could potentially create a massive smuggling problem on Poland's borders with Belarus, Ukraine and the Russian enclave of Kaliningrad. Warsaw would have to devote extra resources to dealing with the issue, diplomats pointed out, while the drop in consumption caused by price rises would actually mean lower tax revenues for the Polish finance ministry.

By making the concession on tobacco excise duties, Poland is hoping that it will be able to close negotiations on the taxation chapter in the near future. It has also agreed to introduce value-added tax on books in line with EU practices.

Despite the fact that Warsaw started negotiations in 1999 with five other candidate states, it has only closed 15 chapters, while states such as Lithuania and Latvia, which only began entry talks last year, have closed negotiations in 13 areas.

Poland has agreed to raise its cigarette taxes to high EU levels three years after it joins the Union. The decision comes despite predictions that the move could damage public support for EU membership in Poland and stoke a major smuggling problem on the country's borders with poorer former Soviet states.