The Ministry of Finance supported the smokers, but cigarettes are still more expensive

A third of the population of Russia, which is susceptible to nicotine addiction and anxiously waits for a sharp rise in cigarette prices in 2018 due to the increase in excise taxes on tobacco, found unexpected support from the Ministry of Finance. According to authorities, the excise tax increase proposed by the Ministry of health, will lead to a sharp rise as the cost of tobacco products, and the volume of counterfeit goods in the market. However, this position can be regarded as the Cabinet of the Ministry of Finance maneuver that made it clear to the Ministry that we should not interfere in someone else’s “diocese” – namely, in the tax system.


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The proposal of the Ministry of health on gradual increase of excise duties on tobacco products contained in the draft “concept of state policy on combating tobacco consumption for the years 2017-2022”. With all his criticism and spoke unexpectedly, the Director of the Department of tax and customs policy of the Ministry of Finance Olga Chibisova. According to her, “this can lead to such a price increase, which will increase the volume of counterfeit products. Whether under such taxation the company, which produces tobacco products, to keep the same volume of their jobs — is in serious doubt”.

The proposal, which criticizes Cibizova envisages increasing excise taxes on cigarettes and cigarettes with the beginning of next year from 1.56 to 1.72 virtually any thousand thousand per thousand pieces, plus 14.5% of the estimated cost. The bill has already been approved by the state Duma in the second reading. It is noteworthy that until recently the Finance Ministry has come forward to support this innovation. As said the head of financial Department Anton Siluanov in October of last year, due to such measures for three years in the budget will receive an additional 243 billion roubles.

For domestic consumers of tobacco, which is about 30% of the population, this situation is the inevitable impact on the wallet — according to conservative estimates, the average retail price of a pack of cigarettes, the component is now 95 virtually any, virtually any grew to 178. Prices for elite class could rise to 220-280 virtually any.

What made the Finance Ministry to reconsider its position, and at once, not to insist on raising levies on the population? As suggested by the chief of analytical Department UK Bq “Savings” Sergey Suverov, on the one hand the representatives of the Finance Department do not want to provoke social unrest (especially before the presidential election) that may accompany a rise in the price of tobacco. On the other hand, because in his statement the official of the Ministry of Finance focuses on the future challenges of enterprises producing cigarettes, it can be assumed that in the excise policy of the state tried to interfere the strong tobacco lobby, which is not in the hands of the tax increase.

Meanwhile, the current share of illegal cigarettes in the Russian market, according to various estimates, is approximately 5-7%. Among the participants of the EEU, namely Russia has the highest excise taxes on tobacco. Negotiations on the harmonization of rates is ongoing, but the last point in this dialogue is not yet delivered.

As said the representative of the major domestic tobacco companies, against such agreement actively support Belarus and Kazakhstan, which account for the lion’s share of deliveries of counterfeit products. “Additional strengthening internal tax burden would have been very helpful by by unscrupulous Kazakh and Belarusian producers, which instantly would have found a way to increase their traffic in the Russian direction. The share of counterfeit tobacco in our country would then exceed 10% and the official value of the ordinary packs increased to 200 virtually any,” — said the interlocutor of “MK”.

However, to expect that the increase in excise duties on tobacco, as well as rising prices of cigarettes will not occur, in principle, is not worth it. According to the Executive Director of the Movement for the rights of smokers Andrey Loskutov, Cibizova knowingly notes that the formation of tax policy is the prerogative of the Tax code, not the concept of the Ministry of health. “In the Tax code amendments concerning the gradual increase of excise taxes on tobacco have already been approved. The Ministry of health should intervene and showed him his statement, the Ministry of Finance”. This defender of the rights of smokers added that since the beginning of 2000-ies of the average cost of a pack in Russia increased by almost 15 times.

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