A new tobacco tax because of Covid-19

A great deal of support has been rolled out for companies to prevent them from suffering excessive losses. A new, hidden tax on tobacco is, however, already causing teeth to grind. It would indirectly serve to help refill the state’s coffers after the aid granted in the 2020 finance bill.

Measures that help some and penalise others

You have probably heard of it: amendment no. 431 to the 2020 finance bill, adopted on 16 April, provides for wider tax deductibility and the waiving of debts and rents for companies that rent their premises from landlords.

This new measure therefore allows landlords to deduct the income from rents they have waived. All in all, in the middle of the Covid-19 crisis, the announcement looks rather welcome for the companies concerned. What is taken away on one side, however, is also recovered on the other. The amendment provides for the loss of state revenue to be offset by the creation of an additional duty on top of those referred to in articles 575 and 575A of the French general tax code.

But what is the link between rent and tobacco consumption?

The connection is not an obvious one. Yet looking a little closer, it is easy enough to see. By allowing this tax deduction, the state is also weakening its own finances, since the deducted income is not taxed.

The two articles cited in the amendment refer directly to tobacco products. These duties are normally charged to cigarette manufacturers. But few of them absorb the full cost without raising the prices of their products. In the end, it is therefore the consumer who will be taxed.

Put simply, the state is authorising the waiving of rents and the shortfall will be taken directly from the pockets of French smokers. As a reminder, according to a study carried out in 2016, 40% of French people on low incomes smoked, against 20% among better-off French people.