This negative trend can be overcome by differentiated excise rates on cigarettes and tobacco products for electric heating (HTPs). This was written by Oleg Pendzin, an expert of the Economic Discussion Club, in his blog on RBC-Ukraine, UNN reports.
"The main feature of the market for electrically heated tobacco products (HTPs, popularly called sticks) is its legality. Tobacco heating devices and sticks for them are too technologically advanced to be counterfeited as cigarettes in basement conditions. So, we are talking about the absence of an illegal market for HTPs in Ukraine, unlike cigarettes," said Oleg Pendzin.
Currently, Ukraine has a single excise tax rate on cigarettes and HTPs. And in the European Union, which our country is striving to join, taxes on tobacco heating products that are less harmful to human health are lower. Moreover, amendments to the EU Directive on excise taxes on tobacco products are currently being prepared, which will introduce a 50% difference between excise taxes on heating elements and cigarettes.
The expert emphasizes that the benefits for the state from this approach are obvious. First of all, Ukrainian smokers will be able to switch to legal, more affordable HTPs after the excise tax rates on cigarettes are raised, instead of buying cheap counterfeit products from shadowy manufacturers. According to expert estimates, the introduction of different excise tax rates for HTPs and cigarettes will generate additional revenues of UAH 3.82 billion over four years (almost UAH 1 billion per year).
But the main issue in this matter, according to the economist, is the prospect of Ukraine's membership in the EU, because if our country has chosen the path of European integration, it must comply with the rules and directives of the European Union.
"Ukraine should not reinvent its own unique bicycle, but should implement European regulation on its way to the EU," the expert emphasized.
Ukraine will also be able to attract additional investments from manufacturers of solar thermal equipment. After all, differentiated excise rates create an economic incentive for all global manufacturers to expand their presence in the Ukrainian market. It is worth noting that Philip Morris (IQOS), Japanned Tobacco (Ploom X), and British American Tobacco (GLO) have smokeless products in their portfolios.
"The arrival of global players in the Ukrainian market means investment in launching such products, and given Ukraine's future membership in the EU, potentially their production here. Does Ukraine need investments? This question seems even out of place. Any investment always means additional budget revenues," Pendzin summarized.