JT International: The latest decision to increase excise tax on cigarettes - is an aggression against the buyer

"The unprecedented increase in excise taxes on tobacco products in Ukraine, taking place from December 2007 to provide a new pressure on the already low purchasing power," - said Marchant Case, CEO, JT International Company Ukraine ", -" we are working on this the market for more than 15 years, having invested more than $ 130 million, but never before have we been exposed to so many spontaneous tax initiatives during the past 2 years, taken in violation of the Constitution and some laws of Ukraine. "
The bill number 4707, Parliament voted yesterday, once again significantly increases the rate of excise duty on tobacco products. Now about 65% of the cost of a pack of cigarettes a consumer pays the government in taxes. This was due to the fact that the weight of excise tax in the price of a pack rose to 5.11 times on different brands of cigarettes in December 2007. The situation is also aggravated by a significant increase in costs of raw materials for the production of tobacco products and the devaluation of the hryvnia, which are borne by manufacturers and sellers.
Consumers will have to pay in 2,5-6,5 times more for their usual brand, compared with December 2007. While the price of cigarettes has increased significantly since 2007, unfortunately, the growth of real incomes of Ukrainians was one of the weakest in Europe. In terms of gross domestic product per capita in Ukraine cigarettes now one of the most expensive cigarettes in Europe.
Unpredictable and inconsistent tax policy has an extremely negative impact on legal tobacco production, which after the May increase the excise tax has decreased by more than 20%.
We can clearly see a repetition of the situation in 1999, when the tax increase during the crisis has significantly undermined the legitimate tobacco business. Every third pack of cigarettes sold in Ukraine at that time, was smuggled out of Russia or Moldova. New tax increases on cigarettes in Ukraine make the stamps from Russia and Moldova is significantly cheaper, encouraging the illegal trade in them again. We are very disappointed that the lessons of the past were forgotten.
In May-August 2009, the total excise levy on products originating in Ukraine and imported tobacco products amounted to 65% of the planned increase in excise duties at the last earnings in the budget. The growing illegal cigarette trade in the future will only increase the budget deficit, destroying the legitimate industry and making it impossible to further investment plans.
Initiatives to increase the excise tax on tobacco products have caused serious damage to our business. "JT International was forced to close the tobacco factory in Cherkassy in May 2009, and a reduction were more than 400 employees. In October, we had two weeks to suspend work at our factory in Kremenchug, because of declining production. Soon, it may be necessary to repeat.
"JT International understands the need to increase the excise tax on tobacco products. But we expect that the state will do so gradually, in a systematic and predictable manner as is done in many countries. The company is ready to share its experience in the field of taxation with the Government