The recent tax increase on tobacco products in Hong Kong has raised concerns about the potential impact on the global pricing of Cuban cigars. Habanos S.A., the Cuban state-owned company responsible for the production and distribution of Cuban cigars, announced a new “global pricing standard” last year, which resulted in a significant increase in the prices of Cuban cigars around the world. The pricing standard aimed to make the prices of Cuban cigars uniform across different countries, with Hong Kong serving as the basis for the new prices.
However, the recent 31.5% increase in cigar taxes in Hong Kong means that the company may need to increase the prices of its cigars again to take into account this tax hike. The tax increase is based on weight, with cigars now being 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). For example, a 16-gram cigar would owe HKD 51.65 in taxes, roughly $6.60 based on current exchange rates.
The potential price increase of Cuban cigars has raised concerns among cigar enthusiasts, particularly those attending the upcoming Festival del Habano XXIII in Havana, which begins on February 27. During the festival, Habanos S.A. executives typically take questions during a press conference, which could provide clarification on whether the company plans to increase prices again.
While the impact of the tax increase on cigar prices in Hong Kong remains uncertain, it is clear that the increase in taxes could have a significant impact on the global pricing of Cuban cigars. With Habanos S.A. already having increased prices once for 2023, the company may be forced to increase prices again to maintain its “global pricing standard” and ensure uniform prices across different countries. Ultimately, the decision on whether to increase prices or not may depend on various factors, including the impact of the tax increase on sales and the company’s ability to absorb the additional costs.