5.7 Paid Taxes
Tobacco companies like to claim that they are conscientious taxpayers and that the government has a high revenue due to them. Actually, in 1996-1999 the tobacco excise revenue increased four times in US dollar equivalent
(Fig. 2.1.3), but tobacco companies contributed very little to this increase. Cigarette production in 1996-1999 increased only 20%, and if compared to 1991, presently it is lower.
In the year 2000, according to the Ministry of Agriculture 29 tobacco industry enterprises (including tobacco fermenting factories) had a gross revenue of 3,892 million UAH. 12 of them had a total profit of 335 million UAH, while 17 enterprises experienced total losses of 36 million UAH. In total, the 29 enterprises have paid 492 million UAH excise tax, 574 million UAH VAT, and 107 million UAH profit tax for main activities. The total amount of taxes was 1,262 million UAH, or 32.4% of the gross revenue. (In 2000 the USD/UAH rate was 5.44).
Unfortunately, consistent data on taxes paid by every tobacco factories are not available, and some reports are not reliable since the factories pay excise tax, VAT, retirement fund tax, profit tax, and local taxes, and sometimes it is not clear what kinds of taxes the report includes. For example, in 2000, according to the State Tax Administration (STA), Philip Morris Ukraine has paid 303 million UAH of payment controlled by the STA, while according to the Philip Morris' own report it has paid 467 million (including local taxes).
Table 5.1. Total taxes (including local ones) paid by tobacco factories of the "Ukrainian tobacco" Association
|
|
1996 |
1997 |
1998 |
1999 |
2000 |
|
Philip Morris total taxes paid (million UAH) |
14 |
|
164 |
279 |
467 |
|
Philip Morris total taxes paid (million USD) |
7,65 |
|
66,95 |
67,55 |
85,84 |
|
Cigarette production (in billion) |
3,64 |
7,78 |
10,62 |
9,43 |
14,5 |
|
Tax per 1000 cigarettes (UAH) |
3,846 |
15,44 |
29,59 |
32,3 |
|
|
Tax per 1000 cigarettes (USD) |
2,10 |
6,30 |
7,16 |
5,94 |
|
|
Reemtsma total taxes paid (million UAH) |
120 |
274 |
548 |
475 |
|
|
Reemtsma total taxes paid (millionUSD) |
64,46 |
111,86 |
132,67 |
87,31 |
|
|
Cigarette production (in billion) |
16,7 |
23,7 |
29,3 |
28,16 |
22,2 |
|
Tax per 1000 cigarettes (UAH) |
5,063 |
9,352 |
19,46 |
21,4 |
|
|
Tax per 1000 cigarettes (USD) |
2,72 |
3,82 |
4,71 |
3,94 |
|
|
Total taxes paid by 10 factories (million UAH) |
150 |
260 |
450 |
1200 |
1500 |
|
Total taxes paid by 10 factories (million USD) |
81,99 |
139,66 |
183,71 |
290,53 |
275,73 |
|
Cigarette production (inbillion) |
44,9 |
54,4 |
59,1 |
53,96 |
58,7 |
|
Taxper 1000 cigarettes (UAH) |
3,341 |
4,779 |
7,614 |
22,24 |
25,5 |
|
Taxper 1000 cigarettes (USD) |
1,83 |
2,57 |
3,11 |
5,38 |
4,69 |
The available data on taxes paid by 10 of the tobacco factories involved in Ukrainian Tobacco Association (TTC and ONIF) and the two biggest taxpayers (Philip Morris and Reemtsma) are presented in Table 5.1. The tax paid per 1000 cigarettes expressed in USD follows changes in the tax policy. It shows that tax rate could be more important than changes in production for generating revenue..
The Ukrainian experience shows that it is not realistic to expect excise tax reduction to cause an increase of production to the extent that it will lead to an increase of revenue. On the other hand, an annual increase of excise tobacco taxes is proven to be a tool with which it is possible to increase governmental revenue.
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