Germany scraps controversial packaging rules for Shisha tobacco

 

BERLIN – Germany’s Finance Ministry has revoked controversial rules for packaging of Shisha tobacco which saw fierce backlash as well as some retailers going bankrupt.

The German government originally introduced the new regulation in 2022 to clamp down on tax evasion, which was seen as a frequent problem in shisha bars.

Bars were buying large packages which they sold divided into small portions. The government pointed to this as tax evasion in the majority of cases, as they paid less tax than they should have when selling in portions.

Despite fines by customs officials, the practice continued to be profitable, until the introduction of the new regulation. It banned 200-gram and 1,000-gram packs from the market. As per the new rules, only sizes of a maximum of 25 grams were permitted.

From July 1, these restrictions will be lifted and packs of all sizes are legal again, according to new regulations made available to dpa.

Under the 2021 reform of the Tobacco Tax Act, the Finance Ministry estimated that there would be around €155 million in additional tax revenue from the shisha industry in 2023.

However, it turned out that tax income declined significantly due to a booming black market, according to the German shisha tobacco association.

While consumption had remained stable despite soaring prices due to the new packaging rules, the legal market collapsed to just a tenth of the 2021 level, with some retailers forced to close down, the association said.

Lawmaker Till Mansmann from the pro-business Free Democrats, a junior partner in Germany’s coalition government, welcomed the latest step in the shisha saga.

By introducing restrictions on the packaging of shisha tobacco, the previous government had “given a gift to smugglers and fraudsters in particular, who have since placed illegal products on the market on a large scale,” he said.

Germany has approximately 5,000 shisha bars, where around a quarter of the shisha tobacco sold in the country is consumed, with the remainder purchased for private use.