Are Increased for Petrol, Tobacco, and Alcohol in Russia

On November 21, the Federation Council approved of the governmental law about the indexation excise rates for 2013 - 2015, the amendments made in Article 193 of the RF Tax Code (see details .).


It should be noted that according to WHO and Association of Tobacco Products Manufacturers Tabakprom, in Russia the consumption of cigarettes per capita was characterized by the stable positive dynamics. At the same time, the trend for movement of consumers' preferences towards the products containing less tar and nicotine is marked.

Over the last years, the trend for the growth of tobacco products consumption per capita to slow down is marked, which in 2007 resulted in stabilization of demand and reduction of output volumes in accordance with the negative trends related to changes in demographic situation in the country, increase of retail prices mainly for the cheap brands due to changes of rates and procedure for collecting excise duties, as well as anti-smoking propaganda.

Within the frameworks of the draft Federal law "On Public Health Protection fr om Exposure to Tobacco Smoke and Consequences of Tobacco Consumption" developed by the Ministry of Health and Social Development of the Russian Federation and aimed at struggle against tobacco smoking, a number of economic measures, among others, are proposed which are aimed to reduce consumption of tobacco products. In particular, the draft law provides for excise policy measures aimed at essential increase of excise duties for tobacco products. Implementing the above excise policy measures, according to estimates of Gaidar Institute, will result not only in the increase of tobacco excise amount charged to RF budget, but also to the significant price rise for the cigarettes, especially in its segment of low-quality brands, which is probably supposed to reduce the demand for tobacco1.

It should be emphasized that indexation of excise duties for tobacco products is motivated with several reasons: firstly, tax component jump in the price of cigarettes, low-quality brands in the first turn, will unavoidably cause the price rise for cigarettes, especially in low-cost segment, which is quite in accordance with the world-wide general logic of carrying out the public health care policy and struggle against smoking within the frameworks of implementing the principles of WHO Framework Convention on Tobacco Control (FCTC). Secondly, stage by stage bringing the excise tax in compliance with the EU2 standards and unifying excise policy at the whole CIS territory is an efficient instrument for scale reduction of the shadow tobacco business. In fact, according to the analysts' data3, over the last years, the excise policy has been a significant factor of wealth at the Russian tobacco market, wh ere the amount of illegal products does not exceed 0.5-1.0% of the market volume, while, according to the Federal Tax Service, collectability of excise for tobacco industry is 99%.

It is necessary to note, that since the indexation level of cigarettes specific rates effective now (and planned until 2015) exceeds CPI, additional increase of rates under these conditions can intensify the stimuli for consumption of cigarettes belonging to the cheaper and less-quality segment of goods. This shows the need to support the tax measures with non-tax ones in compliance with the FCTC principles, including active anti-smoking propaganda, primarily among young people.

M.V. Kazakova: Candidate of Science (economics), Head of Economic Development Department