The Eurasian economic Commission has prepared an agreement on the common rate of “tobacco” tax to the EAEU countries
Photo: Getty Images/Chris Ratcliffe/Bloomberg
The Eurasian economic Commission (EEC) decided to establish by 2022 single for the EAEU indicative rate on cigarettes in the amount of €35 per thousand pieces. This is stated in the letter of the Deputy head of the Ministry of Finance Ilia Trunina the Federation Council Committee on budget and financial markets. Now the price of the popular cigarette brands in Russia exceed the prices for similar products in the EEU countries at 61.9 per cent in the economy and by 55.2% in the mid-price segment, which creates conditions for illegal trade in tobacco products.
The EEC prepared a draft agreement on tax policy principles in the field of excise duties on tobacco products member States of the EEU. This is stated in the letter of the Deputy head of the Ministry of Finance Ilia Trunina from 17 March, the Federation Council Committee on budget and financial markets, a copy of which is at the disposal of “Izvestia”. From the letter of the Ministry of Finance should, as a result of the discussions in the EEC decided to establish by 2022 single for the EAEU indicative rate on cigarettes in the amount of €35 per thousand pieces. In this case, the indicative rate is a mean value, which can be repelled each country when establishing your “tobacco” the excise tax. In the EEU, the excise duties are assigned in the national currency, so the indicative average value for all participants selected in the Euro.
In a letter to the Ministry of Finance said that all countries have developed a range of deviations of the actual rates from the indicative. For Belarus, Kazakhstan and the Russian Federation the size of the deviations should be no more than 15% less and no more than 20% in most. For Armenia, Kyrgyzstan, and in relation to the cigarettes of the first price group (cheapest range) for Belarus for no more than 30% in the smaller side and not more than 20% in a big way.
— Currently negotiating the agreement of these rates of excise duties on cigarettes, emphasizes in a letter to Ilya Trunin.
With Belarus there are differences in the rate of excise tax on cigarettes of the first price category is marked in the letter, Deputy head of the Ministry of agriculture Yevgeny Nepoklonov from March 13 in the Federal Assembly (a copy is in “news”).
Now, the state of the EAEC different calculate the excise tax on cigarettes. In Kyrgyzstan, Armenia, Kazakhstan, Belarus has a fixed rate value of 1 thousand cigarettes. Russia used a more complex formula, which establishes the fixed part and the ad valorem (percentage of the maximum retail price). The resulting amount shall not be less than 2123 roubles for 1 thousand cigarettes in 2017. That is today’s value bet “tobacco” the excise tax in Russia is not less than €34 for 1 thousand cigarettes (at the exchange rate on 27 Mar). In Belarus a similar rate four times lower — about 500 roubles for 1 thousand pieces, and in Kazakhstan, about half — about 1,1 thousand roubles for 1 thousand pieces. Such rates determine the significant price gap retail price.
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In 2016 the excise tax on tobacco products in Russia exceeded the rate of excise duty in the Union countries at least 28% and a maximum of 71%. This assessment is given in the letter of the Deputy head of FAS Alexei Dotsenko to the Ministry of health of Russia from February 20 (copy is in “news”). As a result, according to the documents of the FAS, “the price of cigarettes popular brands in Russia are higher than prices of similar products in the EEU by 35.2%, 61.9 per cent in an economical, 55.2% in the mid-price and 42.3% in the premium segments”.
— The draft agreement on tax policy principles in the field of excise rates on tobacco products was prepared by the Department of financial policy, Eurasian economic Commission, — explained the “Izvestia” in ECE. Its provisions were discussed with the relevant departments and authorized bodies of the countries of the Union. Now a draft agreement prepared for consideration at the level of the EEC Council, which includes the first Vice-premiers of the countries of the Union.
The EEC said that the agreement is designed to minimize illegal cross-border flow of tobacco products. For this, the EEC expects to reach a single coherent indicative rate and to define a consistent range of deviations from its level: it is proposed to limit the variation range of 30% of the agreed fees. To this in terms of tax sovereignty is committed ECE, discussing the issues with the countries of the EEU.
Illegal delivery of tobacco products from countries — members of the Union are a common disorder caused by different excise burden, says the General Director of Association “Tabakprom” Andrew Mironov in a letter to the Federation Council on March 21. He emphasizes that “the growth of Federal revenues will contribute to a maximum convergence (harmonization) of excise rates on tobacco products on the territory of the EAEU, which will allow to minimize the volume of illegal trade.” By estimations of participants of the market, its level is 2%, but in the border areas this value reaches 30%.
— Alignment of tobacco taxes in the Union will eliminate one of the main reasons for the spread of illegal cigarettes in Russia — the difference in prices with neighboring countries, — said Director of legal Affairs and unexplorative relations “BAT Russia” Yana Guskova. — Because of the higher cigarette excise taxes in Russia are a half to two times more expensive than the partners in the Customs Union.
The representative of “BAT Russia” is confident that the increase in tobacco taxes in Russia without equalization of excises in the Eurasian economic Union may trigger further growth of the illegal market, which creates a risk of collecting less in taxes than was planned.
Managing partner Kirikov Group Daniil Kirikov believes that the adoption of the agreement on the approximation of excise rates will allow to cope with the problem of the illegal importation of tobacco products.
This measure is also beneficial for quality tobacco products at higher prices in the long term, these measures will reduce the number of smokers in Russia, — the expert believes.
According to Rospotrebnadzor, the volume of illegal cigarettes in Russia today reaches 10% of the total market.