Executive summary

1. For the last 20 years tobacco growing in Ukraine decreased 60 times and in 2005 only 0.6% of raw tobacco used for cigarette production in Ukraine was locally grown.

2. In 2001-2005 cigarette production in Ukraine increased almost twice: from 69 billions in 2000 to 120 billions in 2005. About one third of this extra production of cigarettes is consumed in Ukraine and the rest is smuggled to the EU countries.

3. In 1996-2005 employment in tobacco factories in Ukraine decreased by 34%, while total cigarette production within the same period increased 2.7 times.

4. Since 2001 tobacco excise taxes in Ukraine were rather stable and in 2006 they became lower, than in Russia, where the taxes increased annually. In Ukraine inflation adjusted cigarette prices decreased in 2001-2005. Tax percentage in cigarette prices in Ukraine is about 33%.

5. Tobacco tax revenue in 2001-2005 in Ukraine increased in line with increase of cigarette production. Within the last ten years (1996-2005) the state budget has collected USD 1447 million as excise tax revenue. Within the same period Ukraine lost USD 1439 million due to negative foreign tobacco trade balance.

6. In 2005, it was estimated that 32 million cigarettes were first sold in Ukraine (with payment of all taxes) and then smuggled to other countries, predominantly Poland, Hungary and other EU countries. Recent excise tax rates increase in Russia creates incentives for cigarette smuggling from Ukraine to Russia. Ukraine is also used for transit smuggling.

Content 'Tobacco or Health in Ukraine. Economic issues, 2006 update'

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