Hong Kong Increases Tobacco Taxes by 31 Percent

The taxes on tobacco products in Hong Kong have increased by at least 30 percent as part of the government’s new budget, including a 31.5 percent increase on the taxes paid on cigars.

Cigars will now be taxed at a rate of HKD 3,228 per kg ($411.25 USD), up from the previous rate of HKD 2,455 per kg ($312.77 USD). The average weight of cigars reviewed at halfwheel is around 16 grams, though a single cigar can range from less than 10 grams to more than 30 grams. A 16-gram cigar would owe HKD 51.65 in taxes, roughly $6.60 based on current exchange rates.

While this immediately affects new imports to Hong Kong, it could have larger, worldwide consequences for Cuban cigars. Last year, Habanos S.A. announced a new “global pricing standard,” which massively increased prices of Cuban cigars around the world, oftentimes doubling or tripling the costs of Cohiba and Trinidad cigars.

As part of the “global pricing standard,” the company said it was attempting to make prices uniform from country to country while using Hong Kong as the basis for the new prices. In reality, the prices are not uniform from country to country, inevitably partly because of the vast differences in how different countries tax cigars. However, if Habanos S.A.’s intent is to have a cigar sold in Germany or Brazil cost the same as it would in Hong Kong, it would seem that the company will need to again increase prices to take into account the 31.5 percent tax hike in Hong Kong. This would not mean a blanket 31.5 percent increase as the Hong Kong tobacco tax is based on weight and not the price of a cigar.

It is not immediately clear whether it will do so, however, we could get clarification as soon as next week. The Festival del Habano XXIII begins Monday, Feb. 27, in Havana. As part of Cuba’s annual cigar festivals, Habanos S.A. executives typically take questions during a press conference.

Habanos S.A. has already increased prices once for 2023.