Because of new packaging size
Shisha tobacco business collapses
09.10.2022, 08:30 a.m
Since the new packaging regulations for shisha tobacco came into force in July of this year, sales have fallen significantly. In the industry there is talk of “hasty intervention by the legislature” and more black market purchases.
Sales of hookah tobacco have plummeted following the introduction of new packaging regulations. According to the Federal Statistical Office, the state collected around 600,000 euros in tobacco tax for these products in July and thus only a fraction of the months before. In August, the federal government even had to refund dealers and manufacturers 1.8 million euros because they returned previously purchased tax stamps. Since July, manufacturers have only been allowed to sell small packs to retailers. This is to prevent tax evasion. The shisha industry complains that it didn’t have enough time to convert its production.
According to the Shisha Association, there are around 50,000 people in Germany who work in the industry – mainly in shisha bars, but also with manufacturers and retailers. Association Managing Director Folke Rega warns that jobs will be cut and companies will go bankrupt. “The hasty intervention by the legislature is hitting the shisha industry hard and opening the floodgates to the black market.”
Resale should be prevented
Since July, manufacturers have only been allowed to sell 25-gram packs to retailers and no longer the previously usual packs with their 200 or 1000 gram contents. The smaller pack is designed to prevent hookah bars from reselling the contents of large packs in small portions while paying less tax than they did when buying the large pack. The shisha industry is annoyed by the more complicated handling when new packaging has to be opened for each shisha bowl in bars – and by the additional waste caused by the increase in packaging.
According to the shisha industry, the situation is tense because the manufacturers hardly have any machines for the small packages. “Retrofitting or buying new machines takes 18 to 24 months, especially since global supply chains are currently strained.” The manufacturers were only informed in August 2021 that their previous machines could only be used until the end of June, says industry representative Rega. He calls for the current regulation to be suspended until spring 2024 so that producers can use their machines for large packs again.
More black market products
There are already signs that the black market is picking up and that illegal goods from Bulgaria and Turkey are being sold underhand in this country. For example, German manufacturers were approached by dubious businessmen and asked whether they wanted to sell their bulk packaging machines. The logic behind it: The black market wants to continue to meet the demand for large, cheap packaging and stock up on old machines.
The controversial packaging is still available in stores until the end of the year, when a sell-off period ends: until then, retailers can still sell the goods ordered before July to their customers.
New tax rate
The reform of the tobacco tax law passed last year also aimed to increase tax revenue for the state. In January, the tax rate applicable to hookah tobacco increased significantly. However, the Federal Ministry of Finance is likely to miss its target of taking in 127 million euros for this product this year. Because, as can be seen from the figures from the Federal Statistical Office, the Treasury only reached 37 million euros in the first eight months.
Doctors warn of the health consequences of hookahs. According to the German Cancer Research Center, water pipe smoke is just as harmful as cigarette smoke. Doctors also criticize the fact that shisha smoke is inhaled deeper into the lungs than the smoke from normal butts.