Public health ad­vo­cates score big to­bacco tax win

Kyiv Post - - Business Focus - BY I LYA TIMTCHENKO [email protected] A cus­tomer pur­chases cig­a­rettes from a kiosk in Kyiv. (Volodymyr Petrov)

Ukraine’s anti-to­bacco cam­paign­ers cel­e­brated one of their big­gest vic­to­ries as par­lia­ment on Dec. 7 passed a law that will sig­nif­i­cantly in­crease to­bacco taxes.

Ac­cord­ing to the plan, in 2018 the to­bacco tax and min­i­mum ex­cise tax per 1,000 cig­a­rettes will in­crease by al­most 30 per­cent, to Hr 773 (22 eu­ros). Af­ter that, taxes will in­crease by 20 per­cent an­nu­ally.

Ukraine’s po­lit­i­cal and trade as­so­ci­a­tion agree­ment with the Eu­ro­pean Union was the im­pe­tus for the law, since it re­quires Ukraine to bring its to­bacco taxes in line with the EU’s min­i­mum rate, which is 90 eu­ros per 1,000 cig­a­rettes.

An­drii Skipal­ski, the chair­man of the board at the Life Re­gional Ad­vo­cacy Cen­ter in Ukraine, a non-profit anti-to­bacco or­ga­ni­za­tion, says that this year alone Ukraini­ans are ex­pected to de­crease their cig­a­rette con­sump­tion by 3 bil­lion cig­a­rettes.

“This is re­ally an un­prece­dented long-term plan to in­crease to­bacco taxes,” Skipal­ski said. “Usu­ally the gov­ern­ment doesn’t want to plan so far ahead.”

Skipal­ski gives the credit for this mostly to the Fi­nance Min­istry. “I would praise the gov­ern­ment the most, even though on the tech­ni­cal side we see that the first draft law was reg­is­tered by… the head of the Rada’s tax com­mit­tee (Nina Yuzhan­ina).”

The Fi­nance Min­istry pushed for amend­ments to the law that make the seven-year plan much more ef­fec­tive, win­ning back­ing from World Bank ex­perts, he said. “On the sur­face, the po­si­tion of par­lia­ment’s tax com­mit­tee and the gov­ern­ment was quite unan­i­mous,” Skipal­ski said.

But the new tax plan also has loop­holes, pur­pose­fully in­serted as a com­pro­mise be­tween the gov­ern­ment and par­lia­ment, whose law­mak­ers too of­ten rep­re­sent the in­ter­ests of the to­bacco in­dus­try. “For two months (the tax and cus­toms com­mit­tee) did not openly or­ga­nize or ar­range any dis­cus­sion,” Skipal­ski said. “This time the com­mit­tee fully avoided public dis­cus­sion. The de­ci­sion was made be­hind closed doors.”

One of the com­pro­mises in­cludes not peg­ging the hryv­nia to the euro.

“In Jan­uary we al­ready see that the euro isn’t 27 (to the hryv­nia) any­more, but 35,” Skipal­ski said. Be­cause of this in­fla­tion, reach­ing the min­i­mum EU re­quire­ments is al­ready un­re­al­is­tic, he said.

Ukraine re­mains a hub for cig­a­rette pro­duc­tion, with four of the world’s largest to­bacco com­pa­nies hav­ing fac­to­ries in the coun­try, pro­duc­ing more than 350 brands. Much of the pro­duc­tion is ex­ported, legally or il­le­gally, to EU coun­tries where cig­a­rettes are more ex­pen­sive than in Ukraine, where a pack of cig­a­rettes still costs less than $1.

Ac­cord­ing to the World Health Or­ga­ni­za­tion, Ukraine’s has seen to­bacco ex­cise du­ties rise by 20 times in 2008–2017. This in­creased state bud­get rev­enues from Hr 3.5 bil­lion in 2008 to a pro­jected Hr 40 bil­lion in 2017. The in­crease is bring­ing health ben­e­fits as smok­ers quit and oth­ers de­cide not to start. In 2017, the Global Adult To­bacco Sur­vey showed a 20 per­cent re­duc­tion in smok­ing by Ukrainian adults over the past seven years.

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