The largest cigarette manufacturer in Croatia, British American Tobacco (BAT), warned on Monday that the higher excise taxes on cigarettes and tobacco, recently introduced by the government, may lead to an increase in the black market sales, as well as consumers increasingly travelling abroad to buy tobacco products.

The government on Friday adopted a directive on raising the excise taxes on cigarettes and tobacco, which came into force on Monday.

Finance Minister Zdravko Maric had said in October that, as a result of the changes, the price of a pack of cigarettes would go up by some 2 kuna (€0.3), starting next year.

BAT bought the Rovinj Tobacco Factory (TDR), based in Rovinj, Istria, in mid-2015 for €505 billion from one of the biggest Croatian companies, Adris Group.

Last year, the factory in the town of Kanfanar near Rovinj produced some 10 billion cigarettes, while this year the planned production stands at 12.5 billion, which is a 50 percent increase of the facility’s output since the 2015 takeover.

The company’s headquarters are located in Zagreb, and it employs around 1,700 workers in Croatia.

BAT said on Monday that the increase in excise taxes is larger than expected, and above the demands of the EU Tobacco Products Directive which limits the production and sales of cigarettes and tobacco products across the EU.

Products from the Kanfanar factory are exported to 25 EU member states.

“We are concerned about the raising of excise taxes and the possible disturbances this would cause on the market, such as consumers increasingly travelling abroad to buy (cheaper) tobacco products, but also a jump in black market sales. This would certainly have an effect on the business of everyone who is a part of the tobacco industry and sales,” BAT told the state news agency Hina.

The price of a pack of cigarettes in Zagreb is on average some €3.60, while in Sarajevo in the neighbouring Bosnia, a pack of cigarettes on average costs some €2.70. In Belgrade, Serbia, the price is even lower, at €2.50 on average.

(€1 = 7.40 kuna)

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