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STOCKHOLM (Reuters) - Sweden's highly-taxed smokers got an unprecedented gift Tuesday when the government proposed slashing tobacco prices to combat a boom in smuggling.
The minority Social Democratic government said in its spring budget it wanted to cut taxes on cigarettes by 27 percent, aiming to reduce the price of a packet of 20 to 36 crowns ($4.60) from 44.5 crowns in the run-up to elections in September.
Swedish customs officers would also get wider powers to search trucks and mail for contraband tobacco and alcohol.
"We want to curb smuggling without encouraging people to start smoking," said Anders Kristoffersson, director of the finance ministry's tax policy division.
Smuggling and organized crime have surged since Sweden joined the European Union in 1995 and relaxed border controls. Big tax hikes last year were widely blamed for fuelling a switch to smuggled cigarette brands.
Sweden's Customs Board estimates that some 39.3 million cigarettes were smuggled into Sweden in 1997, up from an estimated six million in 1995.
Kristoffersson told Reuters the planned cut would be the first real reduction in tobacco tax in Swedish history.
Even so, prices would still be above the end-1996 level of 31.50 crowns per pack.
"We think these measures will be revenue neutral for the budget," said Kristoffersson. "It's a way of keeping a tax base in a longer-term perspective."
Most of the contraband tobacco comes from eastern Europe, where cigarettes cost a fraction of Swedish prices.
Cheaper alcohol is mostly smuggled from southern Europe. A bottle of whisky in Sweden costs an average 270 crowns, and the Customs Board estimates that almost 400,000 litres of alcohol were smuggled into the country in 1997 against 80,000 litres in 1995.
The government's spring budget proposed giving the customs service an extra 14 million crowns in the second half of 1998 to help search trucks for cigarettes, alcohol and other contraband. >From 1999 the service would get an extra 34 million crowns a year.
Customs officers would also get powers to open mail containing tobacco or alcohol, to check if taxes had been paid by the sender.
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