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Shisha bars have been part of the image of German city centers for many years

Photo: Bernd Weißbrod / dpa

According to an industry association, the shisha industry is threatened with a wave of bankruptcies this year. "If the federal government doesn't change course and overturn a senseless packaging regulation, one in three or one in four shisha bars will probably be closed by the end of this year," said the managing director of the Federal Association of Water Pipe Tobacco, Folge Rega, to the German Press Agency in Berlin.

He was referring to conversations with bar operators and retailers who reported a sharp drop in demand for legal tobacco. There have already been some store closures. The economic situation among manufacturers and retailers is very tense, and there is even an “acute” threat of insolvency.

The regulation introduced in mid-2022 states that shisha tobacco may only be sold in single can packaging and no longer in large containers. According to the association's estimates, this has roughly doubled the price. The smaller packaging is intended to prevent shisha bars from reselling the contents of large packaging in small portions and thereby paying less taxes.

According to the industry association, many consumers bought illegal products to save money. They inhaled at home and no longer in a shisha bar. "Black market products are dangerous, they are not subject to state food controls and contain contaminated tobacco and banned substances," warned Rega.

Tax revenue falls, consumption remains stable

A look at the tax statistics confirms the poor state of the shisha industry. According to the Federal Statistical Office, tax stamps were issued for 727 tons of water pipe tobacco in 2023, significantly less than in 2022 (893 tons). This is the net value, after deduction of refunds. Compared to 2021 – the year before the packaging regulations were introduced – there were 6,897 tons, according to the General Customs Directorate.

While tax revenues have fallen sharply, consumption has remained stable, according to estimates by the industry association. Association managing director Rega concludes this from feedback from importers who sell special shisha charcoal and continue to report good business. "A large part of the shisha charcoal is used to light the black market tobacco."

He is annoyed that sellers of untaxed hookah tobacco appear aggressively on social media and sometimes even use their real names to advertise the deals in backyards. "The police and customs remain largely inactive, even though these are systematic violations of the law that make life difficult for honest merchants."

According to the Federal Statistical Office, the value of the tax stamps that the state issued for hookah tobacco was 41.2 million euros in 2023, significantly less than in 2021. At that time, the Federal Ministry of Finance estimated that the tobacco tax reform would generate tax revenue of 155 million euros for hookah tobacco - and as additional income that is added to the income that would have existed without packaging regulations. However, it is now clear that the actual total amount of shisha tax revenue is significantly lower.

kae/dpa