Europe under the threat of smuggling cigarettes from Ukraine

Apparently, as soon as the share of smuggled cigarettes from Ukraine to European markets considerably older.

Yesterday, President vetoed the law, increasing the excise rates on tobacco products. European Union has changed its opposite excise policy, now excise rates in Europe will be increased to 2014-2018 period. Ukrainian State Customs said that the volume of cigarette smuggling from Ukraine rise sharply, manufacturers and distributors of tobacco believe that the special increase in smuggling will not.

The law, vetoed by the president, called for a major increase in excise tax rates. It was expected that the increase in cigarette prices in the retail network to reach 40%. Practically there was no doubt that Viktor Yushchenko would endorse the law, because all previous similar bills met with his unequivocal support. However, the veto this time the President was still used. Apparently, the fear that a sharp increase in excise duties seriously reduce the local production and increase the amount of smuggling from Russia and Moldova, has played a role. Besides the reduction of production and the share of legal cigarette market would inevitably lead to the fact that payments to the state budget would gradually become less and less.

According to the President of Ukraine, the Verkhovna Rada had violated the Budget Code, which stipulates the impossibility of changing tax rates, if the prior fiscal year is less than 6 months. Thus, the President's opinion-one: from such high excise tax rates would have to give up yet.

Representatives of tobacco companies prove: the proposed law would lead to a sharp increase in illegal trade in tobacco products, to reduce the legal market and, consequently, to reduce the revenues. Data Association Ukrtyutyun "indicate that this year the country's decline in production and already amounted to 13,7%.

Recall that the day before yesterday (10 November 2009) Council of Ministers of the EU economics and finance has decided to change excise policy. From 2014 in EU countries excise tax increase from 64 euros per thousand pieces up to 90 euros per thousand pieces, the excise tax on the retail price will rise from 57% to 60%. For some countries, excise duty which is not reached before the current level of excise tax rates in the EU, would be a transitional period during which the Excise must reach these figures. Until 2018 the transition period will be allowed to Bulgaria, Greece, Hungary, Latvia, Lithuania, Poland, Romania and Estonia. The tax legislation of the European Union is constructed in such a way that from 8 countries, who are given a transitional period, it may be a ban on the import of cigarettes in excess of 300 pieces per person.

Since the beginning of 2011 will also increase excise rates on tobacco, since then its size will be 40 euros per kilo, the excise burden will increase costs for consumers of cigarettes by 40%. According to the plan by 2020 will rise to excise duty of 60 euros per kilo, which means more expensive retail products to 50%.

Chief Customs Officer of Ukraine Anatoly Makarenko not so long ago had already made statements to the press about the fact that Ukraine actively imports to the EU of cigarettes. After the events of Nov. 10 the source of the State Customs confirmed the predictions of an increase in smuggling, because with the increase of excise EU market becomes a super-profitable. Much of the smuggling takes place in Europe, across the border with Hungary, Poland, Slovakia and Romania. Most of the contraband tobacco reaches the markets of these countries, but relatively large quantities are shipped on to Europe. The price of a pack of cigarettes significantly increases with the advance of the west, and transportation of cigarettes entirely is not a problem - in fact open borders within the EU.

The growth of smuggling is not profitable to producers, because the tobacco companies, as a rule, are transnational. Experts have reported that several tobacco companies, whose representatives are working in Ukraine, has signed an agreement with the European Union, which occurrence in European countries, smuggling of goods will be automatically mean a fine for the owner of a tobacco brand.