Russia’s Finance Ministry Has Proposed A 33% Increase in Excise Duty on Heated Tobacco And a 94%...

According to Russian media RTVI, the Russian Ministry of Finance proposed to increase the excise tax on heated tobacco (HNB tobacco heatstick) by 33% in 2023, instead of the currently planned 4%.


Also, the excise tax on E-cigarettes and nicotine-containing liquids used in vaping could increase by 94 percent instead of 6 percent.


On November 17, the Federation Council discussed changes to the legislation at a round table dedicated to the Russian tobacco industry.


The committee is discussing revisions to the draft federal budget for 2023 and the planning deadline for 2024-2025 for its second reading in the State Duma, scheduled for November 22.


A roundtable participant told RTVI that the amendment to the new rate came about two weeks ago.


According to the Finance Ministry, a 33% increase in excise taxes on heated tobacco(herbal heatstick) and a 94% increase on nicotine-containing liquids would raise federal budget revenues by 13 billion rubles and almost 1 billion rubles, respectively. However, some market participants did not share the ministry’s stance. As a result, Sergey Slipchenko, vice president of corporate affairs at a subsidiary of the Russian company Philip Morris International (which produces Marlboro, Parliament cigarettes, as well as the Iqos tobacco heating system and other products), noted that the proposed increase in excise tax rates would lead to tobacco heating The price of the system stick increased by 17.4 rubles.


In his view, such a sharp price increase would not result in increased budget revenues, but would result in consumer shock and an increase in illegal market share.


Slipchenko recalled that the discrepancy between excise taxes on heated tobacco in Russia and the countries of the Eurasian Economic Union, where most illicit tobacco products come from, was already large.


In Armenia, for example, this tax was reduced by 79%, in Kazakhstan by 77%, in Belarus by 44%, and in Kyrgyzstan by 28%. The situation will worsen if the proposed amendments are passed.


As a result, tobacco company representatives have proposed more restrained rate hikes — 15 percent each for heated tobacco and nicotine-containing products, and 6 percent for regular cigarettes instead of the planned 4 percent. In his view, this would lead to a slowdown in price increases (up 7.9 per cent per pack of sticks) and to a real increase in federal budget revenues.