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Issue № 76. October 2019

Objectives of Tobacco Taxation in the Situation of Eurasian Economic Union Excise Harmonization and Market Reduction

Polina O. Kuznetsova

Senior Researcher, Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration; postgraduate student, Lomonosov Moscow State University, Moscow, Russian Federation.

The main objectives of tobacco taxation are to limit dangerous consumption and at the same time to effectively collect budget tax revenue. The experience of many countries suggests that the increase in excise taxes and prices can be simultaneously accompanied by decreasing smoking prevalence and growing budget revenue which is due to the low price elasticity of tobacco products.
The purpose of this work is to analyze the processes occurring in consumption and tobacco taxation in Russia. The results of the tobacco control policy of the last decade are contradictory. Despite the obvious success associated with the growing tobacco excises and prices and the tightening of non-price tobacco control measures in early 2010s, excise policy has recently weakened significantly. Integration plans within the EAEU suggest that this a long-term trend.
The EAEU Agreement on the principles of tax policy in the field of tobacco excises did not take into account European experience: an “excise ceiling” was introduced, and the excise rate was set at a low level for Russia. As a result, the growth of tobacco excises and prices stopped. According to the obtained results, it was the insufficient indexation of excise taxes, rather than an increase in illegal consumption or the exhaustion of tax burden reserves, which led to a decrease in nominal tobacco excise budget revenues in 2018.
The experience of the EU in 2004–2007 can be considered as successful harmonization at the high level of tobacco excises. The use of two target indicators — the minimum excise share in the retail price and the minimum specific excise tax — made it possible to exert different pressure on the tax systems of the member countries. As a result, excise harmonisation in EU did not lead to a weakening of tobacco control policies in countries with a high initial excise level.


Smoking, excise policy, excise harmonization, Eurasian Economic Union, cigarette affordability.

DOI: 10.24411/2070-1381-2019-10002

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