Bill No. 9188 is an attempt of collusion of transnational tobacco companies.
He stated this in an official letter of the Association “Manufacturers of tobacco products,” the Head of delegation of European Union to Ukraine, Hugues Mingarelli, – reports the edition Money.
The Cabinet of Ministers gave to Parliament a draft law No. 9188 “On amendments to subsection 5 of section XX “Transitional provisions” of the Tax Code of Ukraine regarding the fiscal mechanism to prevent the sale of excisable goods is less than the amount of taxes”. The document proposes to introduce three innovations: if the size of the declared retail price of less than the minimum excise tax liability, multiplied by a factor of 1.65, the amount of the excise tax should not be less than the minimum excise tax liability multiplied by a factor of 1.4; to prohibit the sale of tobacco products at prices lower by more than 5% of the settlement; impose penalties against businesses that violated a “price quota” of 95%.
The authors of the bill promise to increase revenues from the industry. However, by 8 October, the Association of “Manufacturers of tobacco products” appealed to the Head of delegation of European Union to Ukraine, Hugues Mingarelli with an official letter, stating that “to date, Ukraine has entered the active phase of price collusion of the three largest multinational tobacco manufacturers, controlling at least 75% of the market.” We are talking about companies “Philip Morris Ukraine”, “Japan tobacco international Ukraine” and “V. A. T. Priluki”.
In a letter to the Association draws attention to the fact that “the bill is contrary to the provisions of EC Council Directive No. 2011/64/, according to which manufacturers are free to determine retail prices for each of their products, and that there were practice trials, where it was recognized that any attempt to set minimum prices to create a competitive advantage are illegal. But the EU delegation had provided explanations to the Ministry of Finance of Ukraine on this issue. In particular, it was noted that the introduction ratios of 1.65 and 1.4 is very similar to the illegal attempts of price regulation in some European countries… Even in the summer of last year, the AMCU has explained (letter Ref. No. 126-29 / 02-8287 from 01.08.2017 year) that the establishment of minimum retail prices on tobacco products at a fixed level (at least 95% of the maximum retail prices) and the simultaneous establishment of maximum retail prices at a fixed level (ratio of 1.65) definitely will have anticoncurrentiel effect and will lead to the sale of all brands of cigarettes from all manufacturers at the same price. In addition, a single tobacco distributor “Tedis Ukraine” will independently determine allowance trading other wholesalers and retailers.
The Association also believe – if the specified formula to enter, say, the new year, the retail price of a pack of cigarettes is not physically able to be below 36 UAH. Prices for inexpensive brands will be artificially increased, but the price of more expensive products will not change. In other words, the cigarette companies the upper price segments will gain undue market advantage.
It is worth noting that the Verkhovna Rada of Ukraine has consistently ignored projects, and offers an existing mechanism of an excise tax. In particular, to increase the ad valorem component of the tax charged in percentage to the price of the products. It is the balancing of this component allows you to increase revenues and keep competition in the market – a large tax is levied on expensive cigarettes, as it should be according to the logic. Now advalor of cigarettes in Ukraine one of the lowest in Europe (12%). However, all initiatives to increase it to at least 16% met with fierce resistance by the tobacco parliamentary lobby.