Jump to full article: Reuters, 2001-03-22
Author: Radu Marinas
Intro: Romania's leftist government decided on Thursday to raise cigarette taxes by around 20 percent, drawing a hostile response from foreign tobacco firms which threatened to shut their factories and leave the country.
Four of the world's top cigarette makers -- British American Tobacco, Japan Tobacco , Philip Morris and Papastratos -- have joined forces to protest against the change.
The four say they are being punished for paying taxes, while state firm Tutunul Romanesc is effectively allowed to run up vast arrears.
And they accuse Romania's leaders of penalising the big foreign investors they need to kick-start an economy which has shrunk by a quarter in the past decade.
For its part, the government, which is finalising a tight 2001 budget that has to balance tax breaks for entrepreneurs with new revenue, says higher duty is needed to offset falling numbers of smokers.
But the cigarette firms said the real beneficiaries would be smugglers and warned few would be able to afford higher prices in a country where 40 percent of the population lives below the poverty line.
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