Cigarettes Become More Expensive by 26%

Ministry of Finance of Russian Federation has repeatedly stated that it intends to raise excise taxes on tobacco products. Prime Minister Vladimir Putin gave such a commission to the agency. It was unknown only a figure. Today, Russian Finance Minister Alexei Kudrin said that the excise tax has been decided to rise by 60%.

high cigarette price

high cigarette price

“We will strictly implement the concept, approved by the Russian government, on rising of excise taxes and bringing the value of the excise tax on tobacco to the European level. Now thousand cigarettes cost about 270 rubles, and we need to get three thousand rubles per thousand cigarettes. This is a significant growth, so in the next few years we plan to move rapidly to increase the excise tax – to raise the excise tax by 60% in the next year, and then also move to substantial increase “, – Kudrin said during his speech at the plenary session of the Duma.

According to Finance Minister, Russia will have the European level excise taxes by 2015; at that time they will rise by 11 times from the current day. In the near future Ministry of Finance will start working on these issues with other countries that are part of the Customs Union. According to Kudrin, increase in excise taxes will create a competitive environment in the tobacco industry to foreign producers.

Experts say that the increase of excise taxes by 60% will lead to rise in price of one pack of cigarettes, on average, by 26%. This means that the cheapest package will cost more than 60 rubles. Professionals who represent tobacco companies believe that such a sharp jump in prices will trigger influx of “black” cigarettes from China and Kazakhstan.

“The increase in excise taxes by more than 30% clearly leads to increased risks of illegal cigarette market in Russia. We have seen similar actions in Eastern Europe, when excise taxes sharply increased within a very short period of time. This led to the fact that today the illegal market ranges from 20% to 40% in Romania, Bulgaria and the Baltic countries “, – said director of communications of the Japan Tobacco International company, Anatoly Vereshchagin.

Ministry of Finance intends to discourage any desire to smoke at the Russians.

As it was stated by Deputy Minister Sergei Shatalov, excise tax burden on tobacco could rise twice in 2012.

Ministry of Finance plans to maintain this rate of taxation until 2015. In this case, it remains unclear what actually is in question – the amount of excise tax or speed of its increase. Currently, the Finance Ministry estimates the effects of increasing of tax burden, and the government will come to a final decision. If it is positive, then the average price of a pack will be about 60 rubles by 2015.

Tobacco companies, of course, oppose the measures proposed by the Ministry of Finance. They argue that “grey” market of tobacco will be as a result of the tax “pressure” in Russia (today its share is less than 0.5%), and the government will miss the state tens of billions of fiscal revenues. Tobacco producers took Poland and Finland as an argument where a sharp increase in tobacco excise taxes has led to smuggling and counterfeiting up to 40% of the market.

For comparison, a pack of cigarettes in Germany costs about 5 euros, or 200 rubles.

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