Ukraine increased taxes on heated tobacco products and electronic cigarettes
Friday, 15 January 2021
To prevent the growing uptake of electronic cigarettes and heated tobacco products (HTPs) by young people and reduce the products’ affordability, the Parliament of Ukraine increased taxes on tobacco products (Law 466-IX).
On January 1st, 2021, heat sticks will no longer be taxed per kilogram but per 1000 units; therefore, the specific excise tax on heat sticks has increased by 4-fold, from UAH 1,139 (€33) per kilogram to UAH 1,456 (€43) per 1,000 sticks. With this increase, the excise duty is equivalent to the minimum specific excise for cigarettes. The rate will keep increasing every year in 2022-2025 in line with the annual 20 percent tax increase on cigarettes to reach a total minimum excise of €90 per 1,000 sticks by 2025.
Moreover, from January 1st, 2021, electronic nicotine delivery systems (ENDS), like e-cigarette liquids with and without nicotine, are taxed at 3,000 UAH (€88) per 1 liter. Since 2018 the Ukrainian Government is implementing the 7-year plan on raising taxes on tobacco, and in line with this plan, the cigarettes’ excise rate has increased by 20 percent, beginning on January 1st, 2021 and will keep increasing every year in 2022-2025.
According to the Note on Tobacco Excise Tax in Ukraine published by the WHO Regional Office for Europe in 2021, switching from the current 1,139 UAH per kilogram to 1,456 UAH per 1,000 sticks will increase revenues from around 1 billion UAH per year to more than 4 billion. HTPs contain more than 20 harmful and potentially harmful chemicals in levels that are significantly higher than in cigarettes, and there is no scientific evidence that HTPs are less harmful than conventional tobacco products.[i]
“Raising taxes on tobacco is supported by 67 percent of Ukrainians, according to the 2020 omnibus survey conducted by the Kyiv International Institute of Sociology. During these challenging times of the COVID-19 pandemic, Ukraine Government made an important step forward to protect its people's health by increasing tobacco taxes, which will reduce tobacco consumption while generating higher fiscal revenues. At the same time, raising taxes on ENDS and HTPs will help to dissuade young people from consuming novel tobacco products,” said Lilia Olefir, Executive Director of Advocacy Center “Life.”
A research report on HTPs tax rates by the Kyiv School of Economics, Vox Ukraine, and the Campaign for Tobacco-Free Kids projects total state budget revenues through 2025 over UAH 103 billion and tens of thousands of lives saved.[ii]
The positive health and economic impact of the excise duties should be magnified by the passage of tobacco control bill № 4358, “On Amendments to Certain Laws of Ukraine on the Protection of the Public Health from Harmful Effects of Tobacco.” This bill was registered in November 2020 by the Committee on Public Health, Medical Assistance, and Medical Insurance and would expand protections from tobacco and nicotine products to all Ukrainians.
Between 2008-2019, cigarette sales in Ukraine decreased by 64 percent, from 125 billion to 45 billion. At the same time, state budget revenues have increased from UAH 3.6 billion to UAH 44 billion, or nearly 13 times. The main factor behind these changes was the increase in the excise duty rate from UAH 0.5 per pack of cigarettes in 2008 to UAH 20 in 2019. This clearly shows that strong tobacco taxation policies are a net benefit for Ukraine. Combined with the measures proposed in bill № 4358, taxation policies will continue to improve public health and contribute a fairer share to the state budget.
The full press release is also available on the website of Advocacy Center ''Life''.
[i] Note on tobacco excise tax in Ukraine. Copenhagen: WHO Regional Office for Europe; 2020. https://www.euro.who.int/__data/assets/pdf_file/0008/465623/Note-on-tobacco-excise-tax-in-Ukraine-eng.pdf
[ii] Policy brief "On the Taxation of Cigarettes and Heated Tobacco Products: The Benefits of Following Current Law for Cigarettes and Law #466-IX for HTPs", Estelle Dauchy, Pavlo Iavorskyi. https://kse.ua/wp-content/uploads/2020/10/Trade-MOF-ENG.pdf