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Tax Gap of Heated Tobacco Products in Poland

Heated tobacco products were introduced in Poland in 2017 with the launch of IQOS by Philip Morris International. In 2017, the Act on Excise Duty was amended to create a new tax category for heated tobacco. The associated excise tax was initially set to come into effect on January 1, 2018, but its implementation was delayed to January 1, 2019 under lobbying from the tobacco industry to secure time to adjust the costs associated with the Amendment’s implementation. It was later postposed again to July 1, 2020. Heated tobacco is defined as “a mixture which contains tobacco or raw tobacco”. Poland applies mixed excise duty on heated tobacco with the weight of the tobacco mixture (kilograms) as the taxable base. Effective July 1, 2020, the new excise tax on novel tobacco products consists of two elements: a specific excise tax of PLN 155.79 per kilogram and an ad-valorem excise of 32.05% of the weighted average retail price (WARP) established by the Ministry of Finance. Updates are published in annual announcements in the official publication “Monitor Polski”. 

The WARP used for novel products is the same as that on smoking tobacco. For the fiscal year starting Jan 2020, the WARP on smoking tobacco was PLN 466.77 per kilogram, implying a minimum excise rate of PLN 305.4 per kilogram. Though the excise tax rates did not change in for the fiscal year starting January 1, 2021, the WARP was announced as PLN 502.29 for that year, implying a minimum excise tax rate of PLN 316.77 per kilogram. In effect, the total excise tax burden is the same for heated tobacco and the “other smoking tobacco” (e.g., pipe tobacco) categories. 

Poland also applies a mixed excise tax system on cigarettes. Since January 1, 2020, the specific excise tax is PLN 228.1 per 1000 sticks and the ad-valorem rate is 32.05% of the retail sale price. The rates have not changed in 2021. There is also a minimum excise duty computed based on the WARP, which was PLN 707.39 per 1000 stick in 2020, and PLN 747.67 per 1000 sticks in 2021.

 

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Last Updated Feb. 24, 2021