Higher taxes and increased smuggling plunge tobacco industry into the red

For the first time since 1989, Poland's tobacco sector is operating in the red. In the first quarter of the year, the industry reported net losses of zl.12.9 million, compared to a profit of zl.115 million in the same period of 2000. According to a survey published by the second largest cigarette producer in Poland, the German company Reemtsma, there are two main reasons for the industry's decline. The first is the sharp rise in excise duties, and the second is the increase in cigarette smuggling from the former Soviet Union. Only three out of the 12 leading producers included in the quarterly survey reported a net profit in the January to March period. "For fear of losing their share of the local market, domestic tobacco producers froze or even lowered retail prices, despite the growing burden of taxes," the industry report said. Spokesman for Reemtsma Polska, Jan Wierzbicki, said that because of the lower cigarette prices and falling sales, revenues from excise duties would not reach the zl.8.5 billion envisaged in this year's budget. (Reuters; Puls Biznesu, p. 4) A.D.