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The Government of the Republic of Serbia

In the service of citizens

Action plan for tobacco production and trade adopted

Belgrade, 23 March 2007

Serbian Minister of International Economic Relations and Coordinator of the Ministry of Finance Milan Parivodic said that the government adopted the Action plan for the production and trade of tobacco and tobacco products at its session yesterday.

Milan Parivodic

Parivodic explained that the aim of this document is to fully harmonise the domestic legislation with regulations from the Central European Free Trade Agreement (CEFTA) and the World Trade Organisation (WTO).

Parivodic said at a press conference that this document, which will be applied from 2008 to 2012, regulates relations between the state and the tobacco industry, and pointed to the importance of the four leading tobacco companies in Serbia: British American Tobacco, Japan Tobacco, Philip Morris and Monus.

He said that in order to enable further development of tobacco industry, increase exports of tobacco products and improve agricultural tobacco production, a working group was formed, made up of representatives of the ministries of finance, international economic relations, and agriculture, forestry and water management.

The task of this working group was to take into account new circumstances resulting from the signing of CEFTA agreement and to adjust the entire relationship between the state and the tobacco industry to them, so that the above-mentioned goals could be achieved, the Minister said.

The Action plan prescribes measures that will enable excise revenues to remain high, increase the exports of tobacco products, and provide incentives to agricultural producers to make greater quantities and improve the quality of tobacco, he added.

Parivodic said that the Ministry of Finance is preparing a new decree on interim financing from the budget by the end of June this year and announced that that document will be adopted at the session of the Serbian government that will be held on March 29.

The Decree on interim financing will contain the existing decree according to which budgetary users are being financed, Parivodic said and specified that funds from the budget for six months of this year cannot exceed the half of the funds adopted by the budget revision for 2006.

He pointed out that the text of the new decree will be sent to all ministries on March 26, and will be on the agenda of the session of Serbian parliament’s economy and finance committee.

Vlatko Sekulovic

Serbian State Secretary at the Ministry of International Economic Relations Vlatko Sekulovic explained that the Action Plan for production and commerce of tobacco and tobacco products, which envisages amendments to the certain laws, will create conditions for unhindered ratification of the CEFTA and Serbia’s further integration in the WTO.

This document abolishes the discriminatory excise taxation, thus providing the same treatment to domestic and foreign brands of cigarettes, said Sekulovic, and added that customs duty for these products will be increased for those countries who have not signed the free trade agreement with Serbia.

He stressed that Serbia demands that other countries signatory to the CEFTA also implement this document in full, thus opening up their markets for Serbian products.

According to Sekulovic, in case that does not happen in the upcoming period, Serbia will take certain legitimate measures to protect the interest of its own industry.

Serbian State Secretary at the Ministry of Finance Vesna Arsic said that the aim of the said Action Plan among other things is long-term securing of fiscal proceeds, and recalled that excise proceeds have doubled since 2003.

Customs duty on cigarettes, according to the Action Plan, will be increased from next year from the present 15% to 57.6%, and it is expected that this change will increase budgetary proceeds by €13 million, said Arsic.

She pointed out that this measure also establishes a specific rate of excise taxation on cigarettes, in which the minimum will be worth €5.15 per 1000 cigarettes for those cigarettes with the lowest retail price, while the maximum will be €7.57 per 1000 cigarettes for those cigarettes with the highest retail price.

The plan includes the measure according to which domestic cigarette producers will be provided stimulus to buy domestic tobacco, said Arsic, specifying that the present obligation for buying tobacco from domestic tobacco producers for cigarette producers in Serbia, will be replaced by the introduction of relief worth the value of the tobacco purchased, and beginning this year that obligation will be reduced by 20%.

She said that suitable agrarian measures are also envisaged for encouraging primary production of necessary types of tobacco with the aim to increase returns, quality and competitiveness of prices of domestic tobacco, increasing overall production and creation of conditions for export of domestic processed tobacco.

Director of the company Philip Morris in Serbia Eugenio Sidoli expressed satisfaction at the adoption of the Action Plan, which regulates the functioning of the tobacco industry in a comprehensive manner, and said that the plan envisages important changes in the legal framework, which provide the conditions necessary for developing the tobacco industry.

According to Sidoli, when the measures in the Action Plan are realised as laws Philip Morris will continue to implement its business plan which is focused on developing investments in Serbia.