Tobacco tax affecting AAFES, NEX prices
By SANDRA JONTZ | STARS AND STRIPES Published: July 3, 2009
Prices on cigarettes are increasing, in some cases by as much as $1.60 a pack, at military bases throughout the world due to a hefty tax increase on tobacco products sold in the United States.
Even though the Army and Air Force Exchange Service and Navy Exchange provide tax-free goods, the Defense Department mandates that military outlets keep prices within range of the market value for tobacco and alcohol sold in the States, an AAFES official said Wednesday.
The DOD instruction mandates prices for tobacco sold at military exchanges in the States be set at 5 percent below the lowest civilian competitor price. Overseas, prices must be "within range" of stateside prices, and are set using the average price for items sold at stateside exchanges, AAFES spokesman Judd Anstey said.
"It’s not a choice by AAFES, it’s a requirement. I think that is very important to note," Anstey said.
On April 1, U.S. federal cigarette taxes increased from 39 cents to $1 per pack. That and other adjustments to state taxes on tobacco products translate into higher prices for cigarettes and tobacco products at military exchanges worldwide, he said.
Prices at AAFES jumped July 1.
Prices are to increase at Navy Exchange outlets in Europe on Aug. 1. Some exchanges, however, have already increased prices.
In 2008, AAFES tobacco sales totaled $504 million worldwide, Anstey said. The Navy Exchange sold $123.3 million worth of tobacco products, including cigarettes, cigars and smokeless tobacco in its past fiscal year. That was up 1.6 percent from fiscal 2007 figures, Navy Exchange Command spokesman Philip Garcia said.
But price increases at the Navy Exchange aren’t uniform.
On June 23, for example, the price of a pack of Marlboro Lights and Marlboros at the mini-mart at Capodichino base in Italy increased from $3.85 to $4.50, but Marlboro Ultra Lights stayed the same price.
By Aug. 4, Navy Exchanges in Europe will increase cigarette prices on all brands except Merits, Garcia said.
He could not explain the inconsistent increases or provide information about possible increases at outlets in the Middle East or the Pacific.
One customer said the price hike may help him kick the habit.
"Quitting smoking is a goal of mine, so the price increase is one more incentive to consider in giving it up," said Petty Officer 2nd Class Michael Campbell, who has been smoking since he was 18. He’s now 26.
Since military outlets are exempt from paying taxes, they’ll rake in more revenue from the price increases. Anstey said the additional revenue will be reflected in the amount of money that goes into funding Morale Welfare and Recreation programs.
More than 30 percent of servicemembers smoke or use tobacco, nearly twice the smoking rate of the civilian population, according to the independent Institute of Medicine study, solicited by the Defense Department and Veterans Affairs.