Alcohol and Drug Information Centre (ADIC - Ukraine)

1.6. Tobacco taxes

The current level of tobacco taxes in Ukraine is presented in Table 1.8. The excise taxes for domestic and imported cigarettes are equal. The VAT for cigarettes is equal to the VAT for all other goods (at present 20%). The history of the excise tax policy is discussed in detail below.

Table 1.8. Excise tobacco taxes and duties in Ukraine

Product	Excise tax	Pension fund tax	Import duty		Import
Cigars, cigarillos	20 UAH for 100 pieces		5 EURO for 100 pieces		10 EURO
Filter cigarettes	10 UAH for 1000 pieces	2,5 UAH for 1000 pieces		3 EURO for 1000 pieces	5 EURO for 1000 pieces
Non-filter cigarettes	5 UAH for 1000 pieces	1,5 UAH for 1000 pieces		3 EURO for 1000 pieces	5 EURO for 1000 pieces
Smoking tobacco	10 UAH for 1 kg		2,5 EURO		5 EURO for 1 kg
Smokeless tobacco	10 UAH for 1 kg		2,5 EURO		5 EURO for 1 kg
Raw tobacco	0		1 EURO		2 EURO for 100 kg

In July 1999, an additional tax for the Pension Insurance Fund was introduced. It is equal to 5% of wholesale price. According to a nation-wide survey in November 2000, 52% of the respondents support the introduction of this tax, 33% are of the opinion that this tax needs to be increased, and only 15% said that this tax needs be to be reduced or cancelled. In May 2001, the parliament changed the pension tax from ad-valoreum to a specific one, and presently it is 2.5 UAH per 1000 filter cigarettes and 1.5 per 1000 non-filter cigarettes. The import duties for cigarettes in 1998 were increased from 2.5-5 ECU per 1000 pieces to 3-5 ECU.
Revenue
The excise taxes rates in 1996-1999 increased annually, and, according to the Ministry of Finance, the budget revenue also substantially increased. Governmental revenue from excise tobacco taxation increased from 54 million hryvna (US$ 30 million) in 1996 to 129 million hryvna (about US$ 70 million) in 1997, mainly due to an increase of the tax rate for non-filter cigarettes. In 1998 and 1999, the revenue from excise tobacco taxation increased to 286,7 million hryvna (US$ 117 million) and 522 million hryvna (about US$ 126 million). The excise tobacco tax revenue in 2000 decreased to 446 million hryvna (US$ 82 million), despite the increase of cigarette production. In 2001, the excise tobacco tax revenue was 583 million hryvna (US$ 108 million). In dollar value, it is less than in 1998 and 1999. According to estimates in 1999, the total amount of tobacco taxes revenue (excise, VAT, pension tax and others) was about 1,2 billion UAH (290 million $US) or 3% of the total governmental revenue. In 1998 and 2000, it was respectively estimated as 0.45 billion UAH (185 million $US) and 1.5 billion UAH (275 million $US).

Prices

According to the State Statistic Committee in 1999, 13,54 billion cigarettes were sold in retail sale with a turnover of 840 million UAH. While it is an underestimated retail sale volume and as a method of data collection it is not comprehensive, these figures give us the average price of legally sold cigarette packs (20 pieces) - 1.24 UAH. In 2000, the average price of legally sold pack of cigarettes was 1,56 UAH, which mainly reflect transfers from non-filter to filter cigarettes.

In 2000, the nominal cigarette prices were rather stable. In 2001 there was small decrease in the price of non-filter cigarettes. The following price categories are as follows: 1) luxury imported (Parliament, Davidoff) - 5-6 UAH per pack, 2) licensed and imported expensive brands (Marlboro, Camel, Lucky Strike, R1) - 3-4 UAH, 3) licensed (L&M, Bond, West, Pall Mall, Magna) - 1,5-2,5 UAH, 4) local filter brands (Priluky, Vatra, Cosmos, Prima) - 1-1,5 UAH, 5) non-filter brands (including smuggled) - 0,5-1,0 UAH.

1.7. Tobacco trade earnings