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Tax Gap of Heated Tobacco Products in Paraguay
An excise tax on tobacco was first introduced in Paraguay in 1991 within Law 125/91, Impuesto Selectivo al Consumo. It was initially set at an 8% ad valorem rate of the domestic production wholesale price, or the cost, insurance, and freight (CIF) value in foreign currency. This rate was progressively increased to 12% in 2004 (Law 2421/04) and 13% in 2010 (Law 4045/10). In 2015, a new law (Law 5538/15 and a regulatory decree 4694) raised this rate to 16%, but also included a ceiling of 20%. The rate was increased again to 18 % with a top ceiling 22% in 2018 (Decree 159/18) and endorsed in 2019 (Law 6380/19). The rate was most recently increased to 22% of the wholesale price (Decree 8878 of February 22nd, 2023).
Heated tobacco was introduced in the tax code under Decree 8878 of February 2023, and is currently taxed based on the category for all other tobacco products. Thus, heated tobacco is taxed at an ad valorem rate of 22% of the wholesale price.
All tobacco products are taxed a general value-added tax (VAT) rate of 10% of the retail sale price.
Law 4045/10 had established that 1% of all revenues collected by ISC be directed to the National Secretariat of Sport. Later, Law 5538/15 also established that 40% of all revenues collected by this specific tax would be directed to the Ministry of Health to tobacco prevention and medical care for non-communicable diseases.
Sources:
- Decree 8878
- Official Gazette No 25
- Decree No 6619, Ministry of Finance
- Masi, F., Cresta, J., Ovando, F., & Servin, B. 2021. “Tobacco Oversupply in Paraguay and Its Cross-Border Impacts (Report) [Report]. CADEP”,
Last updated Sept. 1, 2023