Ukraine has one of the lowest prices on tobacco products in the world. According to Numbeo Ukraine, only ranks 95 out of 106 countries in cheapest tobacco products.
For example, the retail cost of Marlboro as of March 2021 is just $2.25 and the cost of Heets for Iqos is $2.10.
Despite regular tax increases, Ukraine is still at the bottom of the list because the tobacco companies in Ukraine play a similar game as they do in other countries that are in a difficult economic situation. They keep prices as low as possible to keep cigarettes and heated tobacco products affordable for kids.
The tobacco companies cannot stay in business unless kids smoke. As Big Tobacco knows, the vast majority of all smokers begin smoking before they reach age 18.
According to Philip Morris‘ own internal documents: “Today’s teenager is tomorrow’s potential regular customer, and the overwhelming majority of smokers first begin to smoke while still in their teens…The smoking patterns of teenagers are particularly important to Philip Morris.”
This quote from 1980s is very relevant for Ukraine in the 21st century. Although the tobacco companies continue to claim that they do not market tobacco products to kids, their actions contradict their words.
Nowadays, tobacco companies are living the dream.
Up until 2016, there were not as many opportunities to promote cigarettes due to the ban on advertising, promotion and sponsorship implemented in Ukraine in 2013 as part of the nation’s commitments under the World Health Organization’s Framework Convention on Tobacco Control.
However, when in 2016 Philip Morris Ukraine launched the import of iQOS devices and heated tobacco products to Ukraine, everything changed.
The lawyers of the tobacco corporation and their lobbyists made sure that heated tobacco products were not legally considered tobacco products and that’s why their advertising, promotion, sponsorship is allowed. Smoking heated tobacco products indoors and in public places, according to the current legislation, is not considered a violation.
Both Philip Morris Ukraine and British American Tobacco have been caught selling and delivering their heated tobacco products to minors. Poor regulation of heated tobacco products explains why the use of heated tobacco products increased dramatically in 2020 among young people 18-30 years, particularly by four-fold among young men and three-fold among young women just over one year, according to the Kyiv International Institute of Sociology.
Moreover, every time the Ukrainian government suggests a plan on a tax increase that would result in a price increase, big tobacco in Ukraine immediately starts threatening the government with a reduction of investments, closing production and the enormous increase of illicit tobacco products, reduction of revenues.
The actual data from State Statistics Service shows that regular tobacco tax increases have led to increased revenue from Hr 44 billion – or $1.4 billion – in 2019 to Hr 54.7 billion – or $1.9 billion – in 2020 (and, over the last eight years, from 18 to Hr 54.7 billion). This is a win-win situation: More revenue for the state and higher prices on tobacco products, discouraging young people from starting the deadly habit.
At the same, the tobacco industry always finds those decision-makers who are willing to serve the needs of tobacco giants. In the previous parliament, Nina Yuzhanina, former head of the parliament tax committee, played the role of key defender of the tobacco companies. With the new parliament, the tobacco industry scored an even higher ranking decision-maker by working directly with Davyid Arakhamia, head of the ruling faction, Servant of the People, with 245 members.
Last but not least, the tobacco industry has a history of employing covert tactics to influence high-level decision-makers in Ukraine. Let’s not forget that the tobacco company knows how to organize closed-door meetings even with presidents. Back in 2018, the meeting between President Petro Poroshenko and the business community, where the representative of Philip Morris International raised a question about a court case on tax avoidance in which the company lost and was fined Hr 635 million or $23 million. The meeting resulted in an unprecedented decision ordered by Prime Minister Volodymyr Groysman to sign a settlement agreement that allowed the tobacco giant not to pay this fine at all.
President Volodymyr Zelensky has met with the tobacco industry in 2019. At least this meeting was reported officially. However, another meeting in October 2020 between Zelensky and André Calantzopoulos, the director of Philip Morris International, was not reported officially. As reported by the media, Calantzopoulos lobbied for a 30% reduction of excise taxes on iQOS cigarettes.
This meeting was followed by an attempt to pass the first amendment that would reduce tax on heated tobacco by 30% in December, but members of parliament did not support this reduction.
In February, Philip Morris International decided to try once again to interfere by asking Arakhamia to push for the amendment on a 30% reduction of excise tax. This reduction would increase the tax-free share (gross profit of Philip Morris International) from Hr 15.98 (the current excise on iQOS) to Hr 24.60 (the excise reduced by 30% industry proposal).
Arakhamia is a busy person because he’s responsible for the efficient work of the ruling party. But this direct involvement of Arahamia in the case of lobbying for the reduction of excise on iQOS raises a lot of questions because here we are talking about serving the needs of one tobacco company – Philip Morris Ukraine.
At the same time, we see that the parliament and its speaker, Dmytro Razumkov, keeps delaying the passage of comprehensive tobacco control bill 4358.
This bill, if adopted, would regulate novel tobacco products the same way as cigarettes, ban tobacco display at points-of-sale, ban tobacco with flavors (such as fruits, menthol, etc). It’s been 18 months since Zelensky publicly promised to strengthen tobacco legislation and to ratify the international protocol to eliminate the illicit trade of tobacco products. The protocol has not been yet ratified and the only reason for that is the tobacco companies benefiting from illegally selling cigarettes that are produced at the tobacco companies.
The question remains open whether the president and parliament will choose to protect the health of kids and youth or they will trade it in exchange for benefits promised by Big Tobacco.
