21 Apr 2009

Raising tobacco taxes will help curb the growing tobacco epidemic in Russia and bring revenues to the national budget, according to a report released on April 21 in Moscow.

The report, distributed by the Confederation of Consumer Rights Protection Organization (KONFOP), was prepared by a group of leading international specialists and provides an overview of tobacco economics in Russia. It is one in a series of reports on tobacco economics funded by Bloomberg Philanthropies and the Bill and Melinda Gates Foundation as part of the Bloomberg Initiative to Reduce Tobacco Use.

Russia’s current tobacco tax rate is very low, between 33 percent and 43 percent of the retail price, among the lowest in Europe. The report recommends a tobacco tax increase to at least 70 percent of the retail price and calls on Russian authorities to strengthen tax administration and enforcement to reduce possible tax avoidance. The tax increase would save lives, improve the health of Russian citizens and stimulate the country’s economy.

The most effective way to reduce tobacco use is to raise the price of tobacco through tax increases that are large enough to affect retail prices. Tax increases are recommended by the World Health Organization as part of a package of interventions to reduce tobacco use.

Called the MPOWER package, these solutions help combat the tobacco epidemic and protect citizens from the harmful effects of tobacco. Russia is obligated to increase tobacco tax rates under the Framework Convention for Tobacco Control, the world’s first international treaty devoted entirely to public health. This treaty provides a road map for successfully reducing tobacco use if rigorously and fully implemented.

Russia’s smoking rate is among the highest in the world, with just over one-third of the population smoking. Tobacco-related diseases are responsible for between 330,000 and 400,000 premature deaths in Russia each year and contribute substantially to the country’s declining life expectancy and population decline.

Additionally, productivity losses due to smoking-related deaths are at least $24.7 billion USD each year, more than 3 percent of Russia’s GDP.

The release of the study on tobacco economics is supported by the World Bank, the World Health Organization and the Higher School of Economics in Moscow.