Multinational tobacco companies reduce prices to monopolize the market

The recent approval of the Tobacco Law, which increased the tax on cigarettes from 70% to 73%, has triggered a series of negative repercussions for the economy and public health in Argentina to the benefit of multinational tobacco companies, according to sources from national SMEs in the sector.

In response to the new legislation, the major multinational tobacco companies, Massalin (Philip Morris) and British American Tobacco (BAT), have drastically lowered the prices of their products in an attempt to corner the market and drive out their competitors. This tactic will lead to a significant decrease in tax revenue, negatively impacting subsidies for tobacco producers, ANSES funds and the resources of the Ministry of Health, which must now manage an increase in expenditure due to the growth in tobacco consumption.

This situation has caused great unrest in the executive branch, which perceives this maneuver as manipulation and is considering the possibility of increasing the tax on cigarettes up to 75%. The Chamber of Tobacco SMEs (UNTAPYA) sees this situation as a premeditated deception, where the tobacco-producing provinces, Congress, the judiciary and various political and economic actors have collaborated with the big tobacco companies to abolish the minimum tax and favor their own interests.

During the six months of debate on the Tobacco Law, it was argued that repealing the previous legislation was crucial to increase tax revenue, balance the market, reduce consumption and contribute more to the health system, which records more than 45,000 deaths annually from tobacco-related diseases. However, the report by the ABECEB Consulting Firm, led by former Minister of Production and Labor Dante Sica, which projected an increase in tax revenue of 315 million USD for this year and 1.4 billion USD between 2025 and 2026, has turned out to be counterproductive according to UNTAPYA, going so far as to describe the situation as ridiculous, at best.

The price reduction by Massalin and BAT has exposed the true interests behind the repeal of the minimum tax, resulting in lower revenue collection by the AFIP, reduced aid to the agricultural sector and a lack of funding for the public health system. National tobacco SMEs have been forced to raise their prices to cope with the tax increase and survive without the financial support of parent companies to cover their operating losses. In a market where marketing and advertising are prohibited, and the quality between premium and economic brands is similar, these measures have put national companies at a disadvantage compared to multinationals, harming public finances and favouring foreign interests.

In this context, the current scenario for tobacco SMEs is particularly challenging. Large multinationals, leveraging their resources and global presence, can adjust their pricing strategies to adapt quickly to legislative changes, while local companies face significant barriers to maintaining their competitiveness.

This imbalance in competition has direct implications not only for the economy but also for public health. By making tobacco more accessible by reducing prices, consumption may increase, contradicting public health goals of reducing tobacco-related illness and death.

In addition, declining tax revenues limit the government’s ability to fund tobacco prevention and treatment programs, as well as other public health initiatives. This places an additional burden on the health system, which is already under pressure from the consequences of smoking on the population.

Given this situation, it is essential that public policies and regulations are carefully designed to ensure a fair balance that protects both public health and the economic viability of local companies. Dialogue between the government, companies and workers’ representatives will be key to reaching solutions that benefit all sectors involved and, above all, promote a healthier and more equitable environment for all Argentines.

Moving toward a comprehensive solution will require policymakers to reconsider current approaches to tobacco regulation. This could include implementing policies that better balance market needs and public health goals, such as setting a price floor to prevent Big Tobacco from predatory price cutting, or increasing resources for awareness campaigns about the risks of smoking.

Another measure could be to strengthen support for tobacco SMEs through tax incentives or subsidies that allow them to compete more effectively without having to compromise their cost structure. Additionally, promoting research and development of less harmful alternatives to traditional tobacco can open up new market opportunities for these companies, while aligning with tobacco consumption reduction goals.

It is also vital to improve transparency and enforcement to ensure that all companies, regardless of size, operate on a level playing field. This includes stricter monitoring of market practices and implementing measures to ensure that taxes and regulations are applied equally to all industry players.

Finally, international cooperation can be key, considering that tobacco is a global problem. Working together with international health and trade organizations can help Argentina adopt international best practices and standards, which could improve tobacco regulation and control in the country.

In short, a well-thought-out and balanced tobacco policy will not only support the local economy and small businesses, but will also contribute to public health, helping to mitigate the impacts of tobacco on Argentine society.

Journalist and passionate about the Asian world.