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Ukraine: tobacco taxes hiked by 40% to decrease tobacco consumption and increase budget revenues

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21 December 2016

On December 20, 2016 Ukrainian parliament supported the amendments to the Tax Code that increase the specific tobacco tax by 40% starting January 01, 2017. This has become the third year through when Ukraine raises tobacco taxes by 40% urging the tobacco corporation to spend billions to keep the prices low and support the consumption level.

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Experts are sure that at least 10% of the domestic tobacco market reduction will be seen in 2017 in Ukraine. And the tobacco taxes will generate no less than 40 bln UAH ($1.4 bln) in 2017 that is 7 bln UAH more than in 2016. 

Thus, a pack of cheap cigarettes will cost up to 20 UAH ($0.74) and expensive cigarettes up to 40 UAH ($1.5) that is a considerable growth of prices by $0,2– $0,3 per pack.

“Prices for all cigarette brands will be raised by 5 UAH per pack, regardless the price of the pack for the consumers. Taxes from cheap cigarettes will be nearly equal to those that are of premium brands, and this may bring additional revenues to tobacco industry,” - explains Kostyantyn Krasovskyi, head of the Tobacco Control Unit of the Ukrainian Institute of Strategic Research, Ministry of Health.

“This time MPs failed to support the parallel increase of the ad valorem tax, as proposed by the Ministry of Finances, because of the tobacco industry interference into the Tax and Customs Committee. An increase of the ad valorem tax could bring additional 2 bln UAH of revenues to the state budget in 2017. Nevertheless 40% increase of the specific tobacco tax is a considerable move towards the reduction of the cigarettes’ affordability”, - finalizes Andriy Skipalskyi, head of the board of Advocacy Center “Life”

According to the EU Association Agreement, Ukraine has to raise tobacco taxes up to 90 Euro per 1000 sticks, and as of 2017 this index will be 21 Euro per 1000 sticks in Ukraine.

Moreover, Ukraine previously had successful experience in tobacco tax increase. From 2008 to 2016, tobacco tax revenues increased from 3.5 bln UAH to almost 33 bln UAH. While cigarettes market reduced from 124 bln sticks to 73 bln sticks.

 

For more details contact Oksana Totovytska, media-manager of Advocacy Center “Life” +38(063) 261 74 05, +38(044) 234 93 20, Этот e-mail защищен от спам-ботов. Для его просмотра в вашем браузере должна быть включена поддержка Java-script .



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