About 2 million were exported and 1 million was 

 imported, leaving about 5 million for domestic 

 consumption (Table 5, Appendix C). 



Cigarette Retail Prices 



Denmark's retail price for cigarettes at US$1.10 

 to US$1.13 per pack of 20 is the highest among the 

 nine countries of the expanded EC. An excise tax and 

 a value-added tax account for 83 percent of the retail 

 price, leaving 6 percent for the retailer and 1 1 percent 

 for the manufacturer/distributor. The excise tax is 70 

 percent of the retail price. The VAT is 15 percent of 

 all costs and margins including the excise tax. This 

 amounts to 13 percent of the retail price. 



A breakdown of the components of the retail price 

 for Denmark's most popular brand is as follows: 



Ore per Kroner per U.S. dollar 

 cigarette pack of 20 equivalent Percent 



Excise tax .... 



27.69 



5.538 



.791 



70 



Value-added 











tax 



5.15 



1.030 



.147 



13 



Retailer 



2.42 



.484 



.069 



6 



Manufacturer/ 











distributor . 



4.24 



.848 



.121 



11 





39.50 



7.900 



1.128 



100 



7 Dkr = US$1.00; 100 ore = 1 Kroner. 



Retail Price Controls 



The Danish Government has a "Monopoly Board" 

 which must approve price increases for tobacco 

 products. The industry must justify price increases by 

 proving increased costs. 



Tariff Harmonization 



As an EC member, Denmark's preaccession, zero 

 duty on tobacco leaf from all sources will continue to 

 be zero from the other EC partners, associate EC 

 members, and those countries receiving preferences in 

 the EC. The common external tariff will be phased in 

 for third countries according to the schedule provided 

 in the Treaty of Accession, that is, 40 percent of the 



CXT January 1, 1974; another 20 percent January 1, 

 1975; 20 percent more January 1, 1976; and the final 

 20 percent July 1, 1977. 



The zero duty on tobacco products from other 

 EFTA members will continue to be zero from the 

 United Kingdom and will be phased to the CXT for 

 other EFTA partners which will become third coun- 

 tries. The duties on tobacco products from all other 

 countries will be phased to zero for other EC partners 

 and will be phased to the CXT for third countries. 



For example, the preaccession duty for cigarettes 

 of 17 Kroner per kUogram (about $2.43 per 1,000 

 cigarettes, or about 5 U.S. cents per pack which 

 would be a little over 40 percent of the wholesale 

 price) will be phased to zero for cigarettes from EC 

 members beginning with a 20-percent reduction 

 April 1, 1973; another 20 percent January 1, 1974; 

 20 percent January 1, 1975; 20 percent January 1, 

 1976; and the final 20 percent July 1 , 1977. It wOl be 

 phased from 17 Kroner per kilo to the EC's common 

 external tariff of 90 percent ad valorem on cigarettes 

 from outside the EC, beginning with a 40-percent 

 reduction of the difference on January 1, 1974; 

 another 20 percent January 1, 1975; 20 percent 

 January 1, 1976; and the final 20 percent July 1, 

 1977. 



Thus, the tariff structure for both leaf and tobacco 

 products will be completely harmonized with that of 

 the EC by July 1, 1977. 



Excise Tax Harmonization 



Denmark's excise tax which amounts to 70 per- 

 cent of the retail price for popular brands has a 

 specific and an ad valorem component. The Govern- 

 ment calculates that the specific component is 9 ore 

 per cigarette or about one-third of the total excise, 

 which is within the 5 to 75 percent specific range 

 required for the first stage of EC excise tax har- 

 monization. 



Value-Added Tax Harmonization 



The 1 5-percent VAT probably wOl stay in effect at 

 the present level until all nine EC countries har- 

 monize their VAT's to a common level. 



EFFECT ON U.S. TOBACCO EXPORTS 



While it is still early to estimate the effect of EC 

 enlargement on U.S. tobacco exports to the three 

 new members, some general observations can be 

 made. 



The big changes could come about through 

 (1) elimination of internal duties among the nine 

 countries, adoption of zero duty on imports from 

 certain associated countries, and adoption of the 



common external tariff (CXT) on imports from all 

 other countries; (2) harmonization of excise taxes; 

 and (3) contribution of monopoly control over to- 

 bacco products retailing in Italy and France. 



The greatest quantitative effect brought about by 

 changes in duties most probably will come in the 

 U.K. market, traditionally the largest market for U.S. 

 leaf tobacco exports (Table 8, Appendix C). 



