The average effective excise duty rate on cigarettes in Bulgaria went up 4.6-fold in the period 2005 – 2013, causing average cigarette prices to rise 3.3-fold from end-2004 until present, according to an analysis of Industry Watch of the tobacco market in the country.

At the same time, the state registered a mere 7% increase in receipts, despite the two-fold increase in excise rates during the period, due to the 45% decrease in the volume of taxed cigarettes on sale, according to the report.

According to Industry Watch, the introduction of the smoking ban in enclosed public places in Bulgaria resulted in a 3-4% decrease in sales of cigarettes, but the long-term impact of the measure cannot be estimated yet.

In Bulgaria, mid-price cigarettes with a price tag of BGN 4.50-5 account for a 37% share of the market, while low-price cigarettes have a 45% stake.

According to the report, the liberalization of the market in Bulgaria abolished the differentiated tax treatment of local and imported cigarette brands and the prices are no longer determined administratively.

The step removed the market advantage of cheaper local cigarette brands and caused the presence of global cigarette brands to increase noticeably.

The increase in the excise tax rate on cigarettes had a different impact on the different price segments.

The impact of the increase in the excise tax rate was much stronger for cheaper cigarette brands.

As a result of the excise tax hike, the average difference between low-price and high-price cigarettes shrank nearly two-fold, from nearly BGN 4 in 2008 to around BGN 2 in 2012, making expensive cigarettes more attractive to smokers.

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