“Is the reduction of the excise duty on cigarettes for heating really a requirement of the IMF?”, — write: epravda.com.ua
On November 22, a meeting of the Working Group of the Committee on Finance, Tax and Customs Policy was held regarding draft law No. 11090 on increasing the excise tax on tobacco products. The main drawback of the draft law, which may lead to an increase in the epidemic of tobacco and nicotine use among young people, is the creation of a tax preference for tobacco products for heating (TVEN, which are used with devices glo, IQOS, Ploom, etc.): the excise tax on cigarettes will reach 90 euros per 1000 pieces, and for TWEN only 72 euros in 2028. However, during the meeting, the head of the specialized Committee, Danylo Hetmantsev, stopped any discussions on this issue due to the fact that the Ministry of Finance provided a letter from the International Monetary Fund (IMF), convincing the parliamentarians that the creation of an excise preference for tobacco products for heating is part of the IMF’s requirements. Does the IMF really require Ukraine to establish a tax preference for TVEN? We read the correspondence of the Ministry of Finance of Ukraine with the International Monetary Fund and did not see any demands there. The IMF’s reply letter to the Ministry of Finance refers to the recommendation to set the excise rate on tobacco products for heating in the range of 45-90 euros per 1,000 pieces. Advertisement: That is, a uniform increase in the excise duty on cigarettes and TWEN to 90 euros fits into the recommendations of the IMF, which were so interested Ministry of Finance of Ukraine. Advertising: I emphasize that cooperation with the tobacco industry during the development of state policies in the field of protection health, and the increase in excise taxes is primarily carried out for the purpose of protecting the population from the harm of tobacco and nicotine, violates Article 5.3 of the WHO Convention on the Protection of Health and Art. 4 of the Law of Ukraine No. 2899-IV. Read also: “I am a professional in making unpopular decisions in this country”: Hetmantsev on raising taxes and detinization Why is the tax preference for TVEN unacceptable? The tax preference for TWEN will lead to even more rapid consumption of these products. Today, in the conditions of the equal excise rate on cigarettes and tobacco products for heating, TWEN consumption is growing rapidly, especially among young people: in 2023, 37% of young smokers aged 18-29 used such products , while in 2024 — already 45%. According to the Analysis of the Vienna Institute of International Economic Studies, the excise model of draft law No. 11090 will lead to a resumption of the growth of the tobacco epidemic in Ukraine after 2026. The World Health Organization emphasizes that tobacco products for heating cause devastating damage to human health, like other tobacco products, and due to their related nature to cigarettes, they should be taxed and regulated in the same way as traditional cigarettes. Excise preference for TVEN will result in a 20 billion UAH shortfall in the state budget. The decision to grant tax preference to TVEN is absolutely unprofitable for the state, as it will lead to a shortfall in the military budget of Ukraine of UAH 3 billion for 2025, UAH 18.6 billion during 2025-2028 and 7 UAH billion for each subsequent year. In addition, the increase in the consumption of tobacco products also leads to financial losses: every year, the state loses about 3.2% of GDP due to diseases related to tobacco use. Tobacco companies sponsoring the war will receive a $20 billion donation Revenues that the Ukrainian budget will not receive, tobacco companies will receive instead. The graph below shows that in the case of creating an excise tax preference of 20%, the producer will have at least UAH 40 tax-free share on each pack of such products, which is UAH 16 more than on a pack of cigarettes. Thus, 16 hryvnias from each pack of TWEN will go into the pockets of tobacco companies, including sponsors of the war, and not into the military budget of Ukraine. On the Ukrainian market, TWEN is represented by the tobacco companies Philip Morris International, British American Tobacco, and Japan Tobacco International. Two of them (PMI and JTI) are international sponsors of the war against Ukraine recognized by the NACP. During the first year of the great war, they paid more than 8 billion dollars to the budget of Russia. The tax preference for TVEN cannot withstand any criticism, as it is completely unprofitable for the state, and it is at least strange to observe how state institutions, which, on the contrary, have to find funding for the budget, refuse additional income from drug products. I call on the Committee on Finance, Tax and Customs Policy to maintain an effective policy of harmonized taxation of cigarettes, cigarillos and TVEN, which meets both the interests of Ukraine and the recommendations of international partners. In that case, if the Committee supports with preference for TVEN, we call on the People’s Deputies to return draft law No. 11090 for a repeated second reading for finalization.
