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Lawlessness of the tobacco business sharks in Ukraine

Author : News agency Gazeta.ua

Source : 112 Ukraine

British American Tobacco, Philip Morris, and Japan Tobacco took more than 80% of cheaper tobacco segment in Ukraine
22:44, 27 September 2016

Read the original text at Gazeta.ua.

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September 16, 2016 Cabinet of Prime Minister Vladimir Groisman submitted for consideration a Draft Law "On State Budget of Ukraine" for 2017. When analyzing this document, obvious becomes a plan of Prime Minister of Ukraine to increase the revenue part of the Ukrainian treasury by tobacco excise tax. But the way realization of realization of this "plan" is not clear.

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The Ministry of Finance has calculated the increase in revenues to the state budget of Ukraine in 2017 due to the tobacco excise tax, increased ad valorem (percentage) rate of excise duty (the variable part of the excise tax paid with cigarettes of middle price segment and above) on tobacco products by 12% - 15%  and specific rates (fixed part of the excise tax paid per 1000 cigarettes) – by 30%.

Ukrainian tobacco market analysis makes it clear that more than 80% of this take the "business sharks" as the British American Tobacco, Philip Morris, and Japan Tobacco. It sells products of the tobacco companies exclusively through OOO "TEDIS Ukraine," which has a monopoly in the tobacco market of Ukraine.

These tobacco companies are openly against the government of Ukraine, their interests are lobbied by "all sorts of experts" in the tobacco industry, individual people's deputies of Ukraine, "the highest levels" of State Finance Service of Ukraine, and even by the leadership bodies in the health sector. Thus, all the lobbying machine of "tobacco monsters" has worked in the "maximum power." It has baselessly accused of the Government of Ukraine in false increasing rates of excise duty to tobacco.

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Also, be sure to say that one more "modest" player of the tobacco market of Ukraine get "under the wheels of the lobbying machine." It occupies almost 18% of the industry, this is Imperial Tobacco, which apparently is not against legal action agency, controlled by Vladimir Groisman.

Why these three companies (British American Tobacco, Philip Morris, and Japan Tobacco) are so willing to influence the tobacco market of Ukraine? And why Verkhovna Rada of Ukraine could not adopt the budget in time due to "the tobacco threads?"

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Due to the crisis, tobacco business has become a leader on the filling budget through the payment of excise tax and the "traditional" taxes and fees, and tobacco companies entered the top 10 largest taxpayers. Is it their achievement? No! Do they affect the number of smokers in the country? No! Do they affect the amount of excise tax? No - or rather they should not, as it is clearly the prerogative of the government.

Obviously, the cost of a pack of cigarettes is small, much less than the amount of excise duty. Moreover, all profits from the sale of tobacco in Ukraine out of the country, are not invested in infrastructure.

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For example, in China, these companies simply do not exist, because the state wants to fully regulate the tobacco industry and all profits from this industry goes to the state treasury in China, where the lion's share of this profit is redistributed from the treasury of the country's health infrastructure. Even in neighboring Belarus, Lukashenko has got rid of the most aggressive player Philip Morris, and the rest of the tobacco companies clearly follow the “state’s rules of the game” in this area.

However, in Ukraine tobacco companies can afford to assign a maximum price.

JTI and Philip Morris own 40% stake in the distributor tobacco company Megapolis Russia, others belong Igor Kisaev, who is the owner of the plant of Degtyarev (the largest plant in the engineering and defense industry in Russia) and a number of other companies in this sector in the Russian Federation.

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These tobacco companies "bully" over the Antimonopoly Committee of Ukraine, making everyone "go to hell" who wants to be distributors of tobacco products, as they have in subjection the largest monopoly in this sphere - TEDIS.

These three companies took more than 80% of cheaper tobacco segment in Ukraine, accusing other players represented on tobacco Ukrainian market of cheating. To a common set of their privileges, they decided to add the minimum retail price of tobacco products, thereby cornered the domestic producers. It will also help them to bypass the obligation to fill the Ukrainian state treasury.

In such confusing, audaciously dishonest, and hypocritical game on the tobacco arena of Ukraine, we, as mere consumers, and the voters of the Government of Vladimir Groisman lay on him all faith and hope, and recall the high personal responsibility of Groisman for all his decisions.

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