On October 5, minister of finance Natalie Jaresko had a working meeting with the representatives of the tobacco industry to discuss the draft of the tax reform proposed by the Ministry of Finance. The parties discussed proposals for Ukraine and the experience of Central and Eastern Europe in setting ad valorem duty and excise rates.
As the next step in this discussion, the tobacco industry should present the Ministry of Finance concrete proposals for the ad valorem duty and excise tax and their impact on the country’s economy. These proposals should contribute to a simple, transparent and fair tax system which could foster investments and create conditions for a sustainable economic development while securing revenues for the state budget and local budgets necessary to finance their priority tasks.
Minister of finance Natalie Jaresko said: «we will do everything possible to find a balance between the optimal tax system complying with European standards and revenues to the state budget and local budgets».
Representatives of the tobacco industry expressed their joint opinion that the European experiences support the idea of increasing the specific duty, since this would motivate producers to increase their prices and thus contribute to more revenues for the state budget. They pointed out: «in Ukraine we see the situation when taxed tobacco products are illegally exported abroad, where the prices are higher». That is why the specific duty should be revised to reduce the illegal market volume, since the overall price increase will support the legal sale of tobacco products in Ukraine.
Key facts about the draft of the tax reform for the tobacco industry:
- special part of the excise tax on tobacco products shall be increased by 40%;
- ad valorem duty on tobacco products shall be increased from 12% to 15%;
- the above taxes shall be charged on the maximum retail price including the VAT (currently: without VAT);
- excise on tobacco products shall be incrementally increased every year by 7% till 2020.