From January 1, smokers will have to pay more. The excise duty on cheap cigarettes will be about 12 UAH, the cost of more expensive cigarettes, the excise tax will amount to UAH 14. It is projected that the demand for cigarettes will fall by 10-11%, but the budget increase in excise duties will bring in about 40 billion in 2017, or 7 billion more than in 2016.
Why increased the excise tax on tobacco products?
According to the Association Agreement, Ukraine shall gradually increase excise rate on cigarettes to 90 euros per 1000 pieces. In 2017 this tax in Ukraine will reach only 21 euros, and the necessary level of the country reaches only to the 2024, if you raise the tax annually. By this time, it is expected that sales of cigarettes will be reduced to 40 billion cigarettes from the current 73 billion thus, according to the experience of other countries, budget revenues will not decrease, but rather will grow to 100 billion per year.
“In 2008, Ukrainians have smoked 125 billion pieces of cigarettes in 2015 is 73 billion pieces. We began to smoke less and it is proved that the increase in excise taxes – good for the state. On the one hand, it gets more revenue: in 2008, the budget received UAH 3.5 bn, in 2015 – UAH 22 bn, with another – reduces tobacco and treatment costs of smokers,” – said the Chairman of the Ukrainian center for tobacco control NGO “Life” Andriy Skipalsky.
It should be noted that earlier it was planned to increase the specific excise duty is only 30% and ad valorem excise duty of 15%, but at the last moment decided to increase by only 40% specific. According to the head of sector of control over tobacco of the Ukrainian Institute of strategic studies Konstantin Krasovsky, in the first months of 2017, all cigarettes will rise by about five hryvnia.
“The excise duty on cheap cigarettes will be about 12 hryvnia (UAH more precisely of 11.92) per pack, the excise tax on expensive cigarettes type Marlboro (32 UAH per pack) – UAH 12.5, expensive cigarettes (UAH 45 per pack) – 14 UAH. Prices on all brands of cigarettes expected to grow in the first months of 2017, approximately five hryvnia for a pack, but this increase of prices on expensive cigarettes provides additional income to a Corporation. In the future, tobacco companies will try to increase income through accelerated growth of prices on expensive cigarettes” – says Konstantin Krasovsky.
Deputies went to a meeting of the tobacco corporations?
It was initially planned to raise as a specific rate of excise duty and ad valorem 15%, but the deputies decided not to touch the latter, which affects the price of expensive cigarettes. According to Andriy Skipalsky, if raising the ad valorem rate, the budget received additional UAH 2 bn.
“It would be better to raise both rates. The fact that the ad valorem rate did not touch, means that the excise tax on cheap cigarettes is increased to 3.5 UAH, expensive – 2.5. The state has a concession to those who smoke cigars, although it would be possible to collect more money. We still hope that the reduced consumption of cigarettes – in fact this is the main idea of raising excise duties,” says Konstantin Krasovsky.
“In manual mode under the guidance of the Chairman of the tax Committee, despite the insistence of the Ministry of Finance, advalor was canceled and re-voted by the Committee. Because of this, Ukraine will not receive UAH 2 billion. But even supported rates – a significant step to reduce the availability of cigarettes,” says Andrew Skipalsky.
According to experts, raising the level of taxation of cigarettes is an effective policy for reducing Smoking rates in the country. But for efficiency, Parliament must pass other laws to counter the spread of Smoking. For example, draft law No. 2820 on amendments to health legislation. The requirement of the law is to zoom in on the dangers of Smoking from 50% to 65% on the bundle and move it to the top of the pile, and to prohibit flavored cigarettes and the settlement of the sale of electronic cigarettes. Experts say, on the packaging of electronic cigarettes shall bear the information about the health risks.
“The draft law corresponds to the Directive 2014/40 of the European Union, but in Ukraine it’s already a year and a half is blocked by the tax Committee. Among the requirements is to oblige the manufacturer to report on the composition of cigarettes and smoke formed during the Smoking and a complete ban on tobacco advertising on the Internet. Also, the law stipulates mechanisms for the settlement of the sale of electronic cigarettes. The manufacturer should warn the smoker about the health risks and this cigarette” – says the expert of the Ukrainian center for tobacco control NGO “Life” Oksana Hotovitsky.
It is worth noting that from January 2016 compared to 2015 excise tax on tobacco products has already increased by 40%. The tax rate in Ukraine is increasing since 2008, during this time, sales volumes of cigarettes fell from 124 billion to 73 billion, and budget revenues increased from 3.5 billion to 22.2 billion.