Sunday, 8 May 2022

Croatia Annually Loses €173m to Illegal Trade in Cigarettes and Tobacco

ZAGREB, 8 May 2022 - Croatia lost HRK 1.3 billion (€173m) in budget revenues to the consumption of illegal cigarettes and cut tobacco in 2021, a survey conducted by the Croatian Employers' Association (HUP) in cooperation with the Ipsos market research agency shows.

The purpose of the survey was to determine the size of the untaxed tobacco market and its impact on the national economy. It was carried out in December 2021 and January 2022 on a representative sample of 1,243 households including 3,062 respondents aged 19 and above.

The survey showed that 27.9% of the population aged 19 and above smoke, with 21.4% of them smoking cigarettes and 7.5 % cut tobacco. In the last three years, despite the rise in prices of tobacco products, this incidence has remained stable.

"According to the survey, the share of untaxed tobacco products is 19% on an annual level and this mostly accounts for untaxed cut tobacco," HUP chief economist Iva Tomić said, adding that higher prices are pushing people to buy unstamped tobacco products.

"Although this trend has been decreasing since 2019, a relatively high level of illegal products is still present, which has considerable economic and social implications, for budget revenues, the rise in crime, public health services, the decline in jobs and so on," Tomić said.

In 2021, revenues from excise tax and VAT on tobacco products amounted to nearly HRK 8 billion, or 8 per cent of total tax revenues. However, due to the consumption of untaxed tobacco products the government loses HRK 1.3 billion annually.

Tomić said that state institutions were making considerable efforts in combating the illegal trade in tobacco products, introducing a product traceability system, increasing seizures of such products, limiting the import of tobacco products from non-EU countries to two packets per person, and imposing restrictions on raw tobacco.

"A good regulatory and tax environment is crucial for business stability and is in the interest of all tobacco market participants," Tomić said.

(€1 = HRK 7.5)

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Friday, 8 April 2022

British American Tobacco to Invest HRK 400 million in Kanfanar Factory

ZAGREB, 8 April (2022) - BAT Group is continuing its investment cycle in the Kanfanar factory with an additional HRK 400 million (€53 million) to be invested in new categories of tobacco products, which confirms its status of a leading private foreign investor in Croatia, company officials said on Friday.

BAT Adria director-general Zvonko Kolobara said the new investment built on last year's HRK 200 million (€27 million) investment in new production lines for heated tobacco products.

Kolobara said the new investment would require new hiring but he could not specify how many new workers would be employed.

Speaking of the black market, he said it was still rather big but that it had been on the decline in the past two years owing to the efforts by the customs service and border police.

Kolobara said that BAT executives had met with Prime Minister Andrej Plenković on Thursday to inform him and the government of the company's investment plans.

Asked about the issue of increasing excise taxes, of which the company had warned, Kolobara said that excise taxes were within the remit of the government but that they would prefer if there existed an excise tax calendar to enable better business predictability and sustainability.

Speaking of inflation, he said that it would definitely have a negative impact on the company's results.

BAT South Europe Director Roberta Palazzetti said that the total investment of HRK 600 million in new production lines had additionally strengthened Croatia's position on BAT's global production map, with the Kanfanar factory being one of the few in the world to produce, apart from cigarettes, heated tobacco products, which have the potential of significant risk reduction for adult smokers.

BAT acquired the cigarette factory Kanfanar, Istria, in 2015 when it took over local tobacco producer Tvornica Duhana Rovinj (TDR).

In the coming years BAT plans to increase the production of heated tobacco products in Croatia in light of growing demand.

BAT said that since the 2015 acquisition it had invested nearly HRK 1.1 billion (€135 million) and continued to increase production, employment and exports.

BAT pays HRK 3.5 billion in taxes and contributions annually and employs 1,500 workers in Croatia. Every year the company contributes more than HRK 1.4 billion in added value to GDP, and the biggest increase in contributions to GDP has been generated by the Kanfanar factory, which has continually increased production and exports, BAT said.

For more, check out our business section.


Tuesday, 21 September 2021

Agriculture Minister Marija Vučković: Primary tobacco production has a future in Croatia

ZAGREB, 21 Sept, 2021 - Despite the big risks in the sector - shortage of labour force, age structure and health - primary tobacco production has a future in Croatia, Agriculture Minister Marija Vučković said on Tuesday at the 21st Tobacco Fields Day, held near Virovitica.

Minister Vučković said that tobacco production is valuable and that in Croatia it has its organisers, relatively secure purchase, the possibility of processing and a closed cycle to the production of almost finished products, which any country would support.

Besides income support, we will endeavour to support all investment initiatives through the rural development programme, said Vučković. She added that the government and ministry advocate retaining support at all levels in the European Union, specifying that an envelope valued at HRK 42 million is envisaged for the tobacco sector, the same as last year.

The Hrvatski Duhani company, which organised Tobacco Fields Day, has 360 producers in Podravina and Slavonia who cultivate 2,700 hectares of tobacco land.

The total annual value of buying tobacco amounts to about HRK 90 million and tobacco is one of the rare agricultural cultures with which Croatia has high competitiveness and a significant production at the EU level, given that Croatia produces about 5% of the EU's total tobacco production.

President of the management board at Hrvatski Duhani Imad Ud-Din Muhammad said that the company was one of the first to introduce sustainability in agriculture in Croatia, which has now been strengthened at the BAT Group level.

We are additionally strengthening investments in environmental protection, health and safety within the entire supply chain, he underscored.

For more about politics in Croatia, follow TCN's dedicated page.

Saturday, 29 May 2021

Tobacco Industry with Net Profit of HRK 81.9m in 2019

ZAGREB, 29 May 2021 - Businesses in the Croatian tobacco industry posted the net profit of 81.9 million kuna in 2019, a rise by 72.5% compared to 2018, according to the data provided by the Financial Agency (Fina).

In 2019, only the three entreprenuers -- TDR, Hvatski Duhani and Tvornica duhana Udbian -- were registered in this business activity in 2019.

They had 902 people on their payrolls.

The total revenues in the tobacco industry were HRK 1.1 billion, and for instance in 2017, they totalled 1.4 billion while in 2003 and 2004 they reached more than 2.6 billion.

The number of workers in this sector fell from 1,106 in 2002 to 720 in 2010, while in 2019 there were 902 employees.

The average monthly salary per employee in this sector rose 64.6% from HRK 6,566 in 2002 to HRK 10,809 in 2019.

The average monthly salary in this sector in 2019 was by 85.9% higher than the Croatian average.

In terms of the total revenues, the best performer in 2019 was the TDR company with 715 employees and HRK 871.4 million in revenue.

(€1 = HRK 7.5)

Wednesday, 12 May 2021

British American Tobacco (BAT) Announces HRK 200 Million Investment in Kanfanar Factory

ZAGREB, 12 May, 2021 - During a visit on Wednesday by Prime Minister Andrej Plenković to the British American Tobacco (BAT) factory in Kanfanar, BAT revealed an investment of HRK 200 million in the production of a new category of heated tobacco products (HTP), underlining the importance of the new logistics centre in Rijeka.

"By expanding production in Kanfanar and opening a hub in Rijeka, we are continuing with BAT's significant investments in Croatia. With the introduction of production lines for new product categories, Croatia is additionally strengthening its position on the global map of production sites in the tobacco industry. We are continuing to expand our selection for consumers in Croatia," BAT Adria director Zvonko Kolobara said in a statement to the press.

He added that the increased capacity in Kanfanar would help BAT meet growing demands for HTP in Europe and northern Africa.

Kolobara thanked the government and Prime Minister Plenković for their efforts in creating an investment climate that stimulates further investments.

Plenković expressed satisfaction that BAT is continuing with its investments in Kanfanar and ensuring jobs. BAT's announcement of the investment comes after its announcement that it could leave Croatia due to unfavourable business conditions.

Plenković underlined that the new investment was an example of a good business climate and that BAT did not exert any pressure on the government to meet its demands to continue doing business in Croatia.

"The new, HRK 200 million investment in new products means a new impetus, enthusiasm and a new generator of business and with that, a contribution to Croatia's economy. The company employs 1,600 people and another 800 cooperate closely with BAT and make a living that way. The investment plans have been coordinated with their headquarters in London and all the employees at the factory will be satisfied while the entire economy of Istria County will benefit from BAT's operations," said Plenković.

He noted that the government was open to large global investors.

"It is excellent that BAT has established a hub in Rijeka for products from China that are distributed throughout Europe. That is additional confirmation of Rijeka's attractiveness as an exceptionally important transport and commercial port in the country. As far as BAT's staying is concerned, the government took account of the Croatian economy and creating conditions for all foreign companies doing business in Croatia and investors to have the same treatment. It is obvious that BAT has decided that the Kanfanar factory is important and that it wants to invest and that Croatia is important to it. There was never any pressure," said Plenković.

For more about business in Croatia, follow TCN's dedicated page.

Monday, 17 February 2020

Government Raising Excise Tax on Tobacco But Helping Enfeebled Agroduhan

As Novac/Danko Sucevic writes on the 17th of February, 2020, it's easy to dislike when Croatian taxpayer money is spent on buying ancient planes, for self-important government figures to tour other countries, paying off redundancies in government and public services, and local government units. Each of these topics is something we can and should discuss, but the topic of helping out Croatian tobacco manufacturers is rarely a subject we tackle, at least in public. Let's look at the enfeebled Agroduhan's story.

On Friday, it came to light that the Ministry of Finance was submitting a proposal for a regulation to raise excise duties on tobacco and tobacco products, and to put it the public debate, and that the Croatian Government had, despite that, decided to help the Agroduhan company from Slatina, which produces tobacco, claiming that it contributes about 30 percent to the total Croatian tobacco production.

It is a company that is by no means whatsoever beginning to pay back a massive 12 million kuna from the pre-bankruptcy settlement back in 2014 to CERP, the Restructuring and Sales Centre, so why did the government decide to help the company out a little more?

According to the government's explanation, because Agroduhan had promised to find private investors by the end of 2021, it would recapitalise it because the threat of the collapse of that company would lead to ''… extremely negative consequences for the Croatian economy, especially the agricultural sector, with the expected collapse of family farms and continued emigration from rural settlements.''

Many readers now wonder how it is that they've never heard of this important enterprise, on which the Croatian economy and an enormous amount of the agriculture sector depend, and is the biggest barrier to emigration from rural settlements. You don't have to wonder because it's just not true. In 2018, Agroduhan had about a hundred employees and 45 million kuna in revenue. That's not even enough to make it the biggest company in Slatina. From Slatina, two companies made it to the list of the 1000 largest, and neither of them are Agroduhan. These are Marinada in 276th place with 360 million kuna in revenue and almost 400 employees, and Drvo-trgovina in 945th place with revenues of 110 million kuna and 165 employees.

From the government's statement on Agroduhan, one can indirectly conclude that it's a loan that will allow for recapitalisation from which this loan and the original debt of 12 million kuna will then be repaid. There are two serious problems with this plan. The first is that the plan also includes CERP participating in the recapitalisation with the already mentioned troublesome 12 million kuna, and the second is that they already tried to carry out Agroduhan's recapitalisation a year and a half ago without any success whatsoever.

What has now apparently changed for Agroduhan's recapitalisation to be worthwhile and expected to succeed cannot be read in any way from the government's reasoning. Probably because nothing has changed and it is actually a service to a party colleague with who knows what political background, but we're just taking a stab in the dark there, of course.

Let's be very un-Croatian now and leave politics aside for a second, the whole story makes no business sense either. According to the latest available financial statements, Agroduhan has been operating at a profit for at least the last five years and has more assets than it has liabilities. To be precise, Agroduhan's total liabilities are approximately 54 million kuna and its total assets are 110 million kuna. Most of this is tied up in land and buildings. It should be no problem for a company with such assets to fund ten million kuna with any bank or find a worthwhile investor. Could it possibly be that someone, somewhere in this saga isn't telling the truth?

The legitimate theme which runs through all Croatian business sagas (just look at Agrokor, for a start) is the extent to which public affairs can be privatised or otherwise left to the market. What part of the health sector, the education sector, pensions, and even the police and military can be privatised? Must forests and waters be nationalised? Rail, roads, airports, oil, gas, electricity, bread and milk... But looking at this example of Agroduhan, it is obvious that such topics in Croatia are drowning in murky water.

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