The Croatian Employers Association (HUP) said on Friday that plans to increase taxes on tobacco, alcoholic and non-alcoholic drinks would have a negative impact on the domestic industry and boost the black market.

Finance Minister Zdravko Maric said earlier this week that based on new regulations on excise taxes, to be put to public consultation soon, the price of cigarettes could go up by HRK 2 per pack, the price of alcoholic drinks could go up by two-three kuna per litre while the price of non-alcoholic beverages would go up only for beverages with a high sugar content.

“Any new industry tax should be approached rationally, by also taking into account the negative effects of those decisions on the economy,” HUP said in a statement.

It noted that the Finance Ministry had accepted some of its arguments and expressed hope that during the public consultation additional adjustments would be possible to “minimise the negative effects of the price hikes.”

Noting that major increases in taxes and excise taxes caused significant market disturbances and encouraged purchases from illegal sources and cross-border purchases, HUP recalled that since 2010 as much as 25% of the legal tobacco market had gone underground, with increased tobacco prices not having resulted in lower consumption or positive health policy effects.

As for the excessive consumption of sugary drinks, HUP says that the experience of other countries shows that additional taxation of those beverages did not result in significant improvements in public health.

HUP also notes that taxes have very little influence on the development of healthy life styles because they are primarily formed through education while tax increases cause harm to the domestic industry and boost the black market.

“It is also not clear why apart from proposing taxing sugary drinks (including energy drinks) the bill also proposes additional taxation of other ingredients that are also found in energy drinks (such as methylxanthines and taurine) if the sponsor of the bill wanted to tax sugar in nonalcoholic beverages for the purpose of health protection and prevention of diseases related to sugar consumption,” HUP wondered.

It added that companies that produce nonalcoholic beverages follow principles of social responsibility and make an effort of their own accord to offer consumers a broad range of products with lower sugar content and less calories as well as smaller containers to control calorie intake.

“HUP members are willing, with other organisations and institutions, to continue working on improving this type of initiatives as well as conducting education and information campaigns to contribute to raising awareness of the importance of care for health and a varied and balanced diet,” HUP said.