Ukraine’s anti-tobacco campaigners celebrated one of their biggest victories as parliament on Dec. 7 passed a law that will significantly increase tobacco taxes.
According to the plan, in 2018 the tobacco tax and minimum excise tax per 1,000 cigarettes will increase by almost 30 percent, to Hr 773 (22 euros). After that, taxes will increase by 20 percent annually.
Ukraine’s political and trade association agreement with the European Union was the impetus for the law, since it requires Ukraine to bring its tobacco taxes in line with the EU’s minimum rate, which is 90 euros per 1,000 cigarettes.
Andrii Skipalski, the chairman of the board at the Life Regional Advocacy Center in Ukraine, a non-profit anti-tobacco organization, says that this year alone Ukrainians are expected to decrease their cigarette consumption by 3 billion cigarettes.
“This is really an unprecedented long-term plan to increase tobacco taxes,” Skipalski said. “Usually the government doesn’t want to plan so far ahead.”
Skipalski gives the credit for this mostly to the Finance Ministry. “I would praise the government the most, even though on the technical side we see that the first draft law was registered by… the head of the Rada’s tax committee (Nina Yuzhanina).”
The Finance Ministry pushed for amendments to the law that make the seven-year plan much more effective, winning backing from World Bank experts, he said. “On the surface, the position of parliament’s tax committee and the government was quite unanimous,” Skipalski said.
But the new tax plan also has loopholes, purposefully inserted as a compromise between the government and parliament, whose lawmakers too often represent the interests of the tobacco industry. “For two months (the tax and customs committee) did not openly organize or arrange any discussion,” Skipalski said. “This time the committee fully avoided public discussion. The decision was made behind closed doors.”
One of the compromises includes not pegging the hryvnia to the euro.
“In January we already see that the euro isn’t 27 (to the hryvnia) anymore, but 35,” Skipalski said. Because of this inflation, reaching the minimum EU requirements is already unrealistic, he said.
Ukraine remains a hub for cigarette production, with four of the world’s largest tobacco companies having factories in the country, producing more than 350 brands. Much of the production is exported, legally or illegally, to EU countries where cigarettes are more expensive than in Ukraine, where a pack of cigarettes still costs less than $1.
According to the World Health Organization, Ukraine’s has seen tobacco excise duties rise by 20 times in 2008–2017. This increased state budget revenues from Hr 3.5 billion in 2008 to a projected Hr 40 billion in 2017. The increase is bringing health benefits as smokers quit and others decide not to start. In 2017, the Global Adult Tobacco Survey showed a 20 percent reduction in smoking by Ukrainian adults over the past seven years.
