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PRAGUE -- Cash-strapped Central and Eastern European governments are turning to a time-tested strategy of raising taxes on cigarettes and alcohol as the recession takes its toll on the region's public finances.
A few countries are seeking other ways to bolster such "sin taxes." Slovakia has formulated a so-called bottle-cap amendment aimed at stemming tax evasion by bar owners who sell bootleg liquor; Hungary is considering a new tax on poker.
"All countries, not just [those in] Central and Eastern Europe, are forced to do something with widening fiscal gaps, and the first thing to think about is lifting excise taxes," said Miroslav Plojhar, an economist at J.P. Morgan.Poland is set to lift its excise tax on cigarettes by 2.6% to 228.80 zlotys ($81) per 1,000 units as of January. That compares to a planned 43% increase in Bulgaria's excise tax on cigarettes, to €76 ($113) per 1,000 units as of 2010.
Bulgarian Finance Minister Simeon Djankov defends the proposed cigarette-tax increase on public-health grounds, and dismisses claims that the government is only interested in increasing tax revenue. Critics of the increase argue that it will lead to growth in the smuggling that has plagued Bulgaria for years.
In the Czech Republic -- ranked among the top consumers of beer -- planned new taxes on the brew are drawing controversy. Starting next year, the tax on beer, whether brewed locally or imported, will rise 33%, to 32 koruna ($1.85) per 100 liters. The government will raise its tax on spirits by 8% next year. It expects the two alcohol taxes together to boost state tax revenue by 1.7 billion koruna ($99 million) in 2010 alone, Finance Ministry spokesman Jakub Haas said.
Russia, meanwhile, aims to raise its tax on beer over the next three years. The bill, calling for a 200% increase next year, followed by rises of 11% and 20% in 2011 and 2012, still needs President Dmitry Medvedev's signature.
Slovakia is grappling with a different situation: As much as 10% of liquor sold in Slovak bars and restaurants is believed to go untaxed because bar owners pour liquor produced by illegal distilleries into used bottles on which taxes have already been paid, selling it as the genuine article.
To reclaim that revenue, the Finance Ministry has proposed that all liquor sold in bars and restaurants be packaged in special, nonrefillable bottles with state-of-the-art caps.
Critics argue that the proposed change would reduce consumer choice and be difficult for companies to provide. The change could also be construed as tacit support for Slovak producers, prohibited under European Union competition law.
Meanwhile, in Hungary, where hundreds of clubs devoted to poker have sprung up without regulation, a proposal to regulate poker games and tax the winnings would bring the game in line with the country's rules on other forms of gambling.The Hungarian Poker Association argues that a tax on winnings will drive players toward online games. Instead, the government should introduce a fixed tax per table, similar to the one in neighboring Slovakia, association President Gergely Tatár said.

WASHINGTON (Dow Jones)--The U.S. Food and Drug Administration on Thursday urged a federal judge in Kentucky not to order the agency to delay enforcing new tobacco laws, saying such a move would have "devastating consequences" on public health. 
The FDA is facing a challenge to its new tobacco powers, signed into law in June, from tobacco companies including Camel cigarette maker Reynolds American Inc. (RAI) and Commonwealth Brands Inc. The companies say the law imposes unprecedented restrictions on their First Amendment rights and want a federal court in Bowling Green, Ky., to order a preliminary injunction to stop enforcement of certain provisions in the regulations. 
A judge for the District Court for the Western District of Kentucky heard from the FDA and the tobacco companies Thursday on the request for an injunction. He could soon decide whether to grant the injunction. 
The law restricts tobacco companies from using color in most ads, bars them from saying certain products are less risky than others and stops them from selling tobacco products in combination with other items, such as soda and mouthwash. 
"It is crucial to the public health that tobacco products not be marketed as reduced-risk products unless they will, in fact, reduce risks," the FDA said in a brief filed with the court. 
The injunction request relates only to the restrictions on marketing tobacco products with other consumer items, and restrictions against advertising that a tobacco product is less risky than other tobacco products. Restrictions on color in ads don't go into effect until June 2010. 
The companies want to be able to make claims in ads and on boxes that certain tobacco products contain smaller amounts of harmful ingredients, such as being low in tar, and are, therefore, less risky than other tobacco products. 
This issue is important to companies that make smokeless tobacco products. Reynolds, for instance, makes Camel Snus, a type of tobacco that comes in a pouch in flavors like "frost" and "mellow." 
In their briefing documents, the companies argue that such information is truthful and should be given to consumers. 
The FDA says such information gives consumers the "mistaken belief" that the products are safe to use. The agency will allow companies to make such claims only after they prove the product does reduce a consumers risk for tobacco-related diseases. That appears to be a high hurdle. The agency notes that medical devices and prescription drugs must go through a rigorous review process before they can be sold to treat or reduce the risk of disease. 
The companies say they aren't completely against the FDA authority to regulate tobacco, and that they support restrictions in marketing and advertising to children. 
While Lorillard Inc. (LO) is a party to the overall lawsuit challenging the advertising restrictions imposed by the law, it isn't a party to the preliminary injunction, according to a company spokesman. The company says it didn't join the request for injunction because it doesn't intend to market tobacco products with claims that they are less risky than other tobacco products.

Cheap cigarettes smuggled from abroad and sold illegally in "tab houses" are getting children hooked on smoking, trading standards officers have warned.
About 30% of under 18s admit to buying illicit tobacco, particularly in areas of deprivation, officials say. 
The cigarettes are sold from private homes without age checks, creating a new generation of smokers, they claim. 
Tobacco smuggling is thought to cost the UK economy about £3bn a year in lost tax revenue. 
'Cheap whites'
Trading Standards say "tab houses" are a growing problem, often charging half as much as legitimate shops. 
They are also said to introduce some children to cigarettes who might not otherwise be able to afford them.Richard Ferry, from Trading Standards North East, told the BBC: "About 30% of under 18s admit to buying cheap and illicit tobacco. It means they start smoking earlier and they can smoke more.
"The people who sell from tab houses don't care who they sell to."
Three types of "tabs" are being sold: 
• Duty free cigarettes, which should be for personal use 
• Counterfeit versions of well-known brands; and 
• "Cheap whites" manufactured just for the illegal market
The UK Border Agency says it has reduced the proportion of illegal tobacco on the market using new technology including more powerful scanners at ports and airports. 
On Tuesday it announced its biggest ever seizure - £120m worth of cigarettes found on a boat off the coast of Ireland. 
Trading Standards say as they have cracked down on shops selling illegal tobacco, the problem has moved to private homes instead - undermining efforts to improve health in deprived areas. 
Dr Rob Hornsby, a criminologist at Northumbria University, said: "We're in a recession now, so people want goods cheaply. From the research I've been conducting it's clear that the market in illegal cigarettes is still very solid."