[Intl-tobacco] Russia: excise tax jump planned

[robert weissman]

Russia Authorities Want to Make Cigarette Smoking a Luxury
MosNews

14.10.2004

MosNews

Russian Finance Ministry decided to increase the budget revenues with
the help of Russian smokers. Deputy Finance Minister Sergei Shatalov
told reporters that the authorities want to begin levying excise taxes
on the retail price of cigarettes, instead of the wholesale, like they
do now. This change is set to take place in 2006. If the authorities'
initiative is successful, cigarette smoking will become a luxury, as an
average pack of cigarettes will cost 30 to 40 percent more than today.

Russia's financial authorities make no secret of the fact that such
plans are no[t] dictated by worries about the nation's health, but by a
simple shortage of budget revenues. The government officials accuse the
tobacco companies of lowering the wholesale price of their produce in
order to pay smaller taxes. In 2003 the government expected to receive
20 billion rubles ($684 million) in excise taxes from tobacco companies,
but received only 16 billion rubles ($548 million), the Russian Audit
Chamber reported. The new plan will allow the Finance Ministry to solve
two budgetary problems at once: the lowering of cigarette prices and
tobacco companies' evasion of taxes.

Sergei Shatalov said that in October-November the Finance Ministry will
create a think tank that will work out the details of a new tax plan.
The main problem will be to determine the retail price of cigarettes
that the excise tax will be levied on, as this price varies greatly from
Moscow to Vladivostok in the Far East. "It is possible that the retail
price will be determined from the prices announced by tobacco companies
themselves," said Shatalov. "Or we will use some recommended prices as
the basis."

Right now the pack of cigarettes in Russia costs between 10 and 50
rubles (34 cents to $1.7) depending on the brand and quality. The new
tax will therefore range from 14 cents to 68 cents per pack. And while
for many Russians it will be a serious enough reason to consider
quitting or lowering their consumption of cigarettes, such new taxes are
nothing compared to what smokers in the United States and Europe have to
endure. According to the information provided by the Earth Policy
Institute in February, 2004, the federal tobacco tax in the United
States comes up to 39 cents per pack of cigarettes. On top of the
federal tax the majority of states levied their own taxes, the average
being an additional 42 cents per pack. In New Jersey the additional tax
comes up to $2.05, in Connecticut, Massachusetts and New York - to $1.50
per pack. Still this is nothing compared to some European countries. In
Norway, for example, cigarette smokers have to pay $5.99 tax per pack,
in Great Bri! tain - $5.03 per pack, in Ireland - $3.52 and in Denmark -
$3.08. The only difference between all these countries and Russia is
that they impose such stiff taxes in order to discourage people from
smoking, while Russian authorities are simply interested in increasing
budget revenues.