Georgia's 2026 Tobacco Tax Reform Draws Industry Criticism Over Cheap Local Cigarettes

Georgia's Tobacco Control Alliance has asked the government to reopen the country's tobacco tax rules, arguing that the reform in force since 1 January 2026 has delivered the opposite of what it was designed to achieve. According to a statement published by primetime.ge, the alliance says the state granted domestic cigarette manufacturers large tax concessions and reduced part of their excise, producing a sharp imbalance on the market.

The declared aims of the reform were to bring more money into the budget and to cut smoking by making cigarettes more expensive. The alliance says figures from the first seven months point the other way: the market filled with cheap domestically produced cigarettes, and as imported brands became dearer, smokers did not quit but moved mechanically to the cheaper local alternative. The group describes the outcome as a double blow that damaged both the state budget and public health.

Nominal growth, real decline

Tobacco receipts rose 9% in nominal terms to 750.4 million lari, but once general price growth is taken into account real revenue fell 1.3%, the alliance said. The divergence between volumes and tax take is sharper at the level of domestic production.

• Sales of locally made cigarettes increased 26%.
• Budget revenue collected from those cigarettes fell 8%.
• The state therefore earns considerably less from each pack sold, while specific businesses grow richer.

Cigarettes became easier to afford

Total cigarette sales in 2026 grew 5% to 184.2 million packs, according to the alliance. Average wages rose faster than cigarette prices, by 9%, which means a month's pay now buys more packs than before.

That reverses the core mechanism of tobacco control, which depends on cigarettes being expensive and hard to reach. The alliance states the product has remained accessible to the most vulnerable and poorest groups, and warns that if the dynamic continues the country will lose still more money.

Proposals put to the government

The alliance wants the tax code reviewed against World Health Organization standards and European practice, and sets out three steps based on WHO recommendations:

• Immediate abolition of the tax privileges granted to domestic manufacturers.
• An increase in the fixed, specific excise to a level where the minimum tax per pack automatically raises the price of any cigarette.
• A statutory escalator that lifts the tax every year at a rate above inflation, so that wage growth does not make cigarettes easier to buy.

British and EU benchmarks

The alliance points to the British system as a direct answer to the situation created in Georgia in 2026, when wage growth outpaced cigarette price increases. Under UK law the tobacco tax rises automatically each year by the rate of inflation plus 2%, so cigarettes become more expensive faster than other goods or household incomes, and affordability declines year after year regardless of pay rises.

In the European Union, cigarette taxation combines two components, a specific duty fixed per pack and an ad valorem duty charged as a percentage of the price. The alliance identifies the minimum excise duty as the main protective mechanism: the EU sets a floor below which the tax on a pack cannot fall, for example 3 euros, whatever the cigarette itself costs. According to the statement, this removes the cheap cigarette phenomenon from the market entirely, because no concession allows a manufacturer to pull the price down.

For producers and importers, the practical consequence of the current Georgian structure is a widened price gap between domestic and foreign brands, with volumes following it. Any move along the lines proposed by the alliance, whether withdrawal of the domestic concessions, a higher specific floor or an indexation rule, would narrow that gap and reset the competitive position of the two groups.