31 Mar 2009

On March 31 the Ukrainian Parliament delivered an important victory for the health of the citizens of Ukraine by voting to increase tobacco excise taxes.

The new law mandates an excise of forty to forty-five percent of the retail price starting May 1, 2009. This is a four-fold increase from previous levels and is the second tobacco tax increase in Ukraine in the last eight months. The new tax covers all forms of tobacco products, from cigarettes and cigars to chewing tobacco and snuff.

The law brings Ukrainian tobacco excise taxes closer to European standards and makes them higher than in neighboring Russia. The new tax is expected to increase annual revenue to the state budget by approximately six billion Ukrainian hryvnas, or nearly one billion US dollars.

The Verkhovna Rada – as the Ukrainian Parliament is known — passed the new law with 241 votes drawn from across party lines, fifteen more than are needed to pass laws in Ukraine. The increase was passed as part of an anti-crisis fiscal package that Prime Minister Yulia Tymoshenko brought before Parliament.

Ukraine’s President Victor Yushenko strongly supports the tax increase and is expected to sign the bill into law soon.

The tobacco tax increase is an important step forward in developing a comprehensive national strategy to reduce tobacco use in Ukraine, but there is room for more progress.  While the new tax brings Ukraine's cigarette taxes closer to most European countries, significant increases are still needed in order to bring Ukrainian tobacco taxes to the level of the European Union.

Increasing tobacco taxes is a proven strategy to reduce smoking and other tobacco use, especially among children. Studies show that every 10 percent increase in the price of cigarettes reduces youth smoking by seven percent and overall cigarette consumption by about four percent.