№ 5/2021

Fìnansi Ukr. 2021 (5): 82–96https://doi.org/10.33763/finukr2021.05.082

TAX POLICY

POLIAKOV Mykhailo ¹

¹Philip Morris Ukraine

Areas for improvement in the tobacco excise policy in Ukraine

The article analyses the ways to improve tobacco excise taxation in Ukraine considering a respective EU Member States experience, consequences of national reforms held in previous years, as well as challenges and potential threats caused by the pandemic. A worsening economic situation and the recent decline in income compounded the existing problems related to tobacco taxation in Ukraine. The increase of excise tax rate on cigarettes by 20% annually till 2025 and an inconsistent decision on more than four times increase of excise tax rates on electronically heated tobacco products (EHTP) pose a risk of boosting illicit trade. The advance payment of excise tax on imported tobacco products, in turn, negatively affects finances of importers due to the working capital diversion. Following that, the priority steps with regard to the excise policy of Ukraine should be aimed at: 1) revision of the existing plan of increasing tax rates on cigarettes by slowing down the growth of tax burden and simultaneous expansion of the plan till 2028; 2) correcting the burdensome reform on excise taxation of EHTP to establish more liberalized tax regime 3) switching to payment of excise tax on imported tobacco products during customs clearance. The mentioned initiatives taking into account a strong need to improve a fiscal situation in Ukraine due to the spread of COVID-19 will reduce a negative impact of increasing excise tax rates and administration procedures on tobacco industry. They will also prevent the growth of illicit trade in tobacco products and thus will contribute to improving the efficiency of tax system and strengthening the confidence of business entities.

Keywords:tobacco products, cigarettes, electronically heated tobacco products, tobacco market, excise tax, tax burden

JEL: Н21, Н25

Poliakov M. . Areas for improvement in the tobacco excise policy in Ukraine / M. Poliakov // Фінанси України. - 2021. - № 5. - C. 82-96.

Article original in Ukrainian (pp. 82 - 96)

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