Approaches to excise taxation of heat-not-burn tobacco products in the EU countries: conclusions for Ukraine

Introduction. The relevance of further modification of the excise tax on tobacco products in Ukraine, taking into account the European experience, is only growing. Problem Statement. Improvement of excise taxation of tobacco products. Purpose. The analysis of approaches to excise taxation of heat-not-burn tobacco products in the EU countries and, on this basis, the development of recommendations on the implementation of the relevant excise tax in Ukraine. Methods. In the course of the research, the following methods were used: abstract-logical, systematization, comparative analysis, expert evaluations. Results. To date, the European Commission has recommended taxing heat-not-burn tobacco products in accordance with the approaches used for the harmonized excise category “other smoking tobacco”, which provides for the establishment of relatively low excise rates. In all EU countries, Great Britain, Norway and Switzerland, the excise burden on heat-not-not tobacco products is lower compared to cigarettes. The discussion on the revision of Council Directive 2011/64/EU is ongoing. According to available information, changes to the legislation proposed to increase the minimum excise duty on cigarettes in the EU from 1.80 to 3.60 euros per pack of 20 cigarettes. In addition, the European Commission proposed to set a minimum excise duty on heat-not-burn tobacco products that is half as much as compared to cigarettes. The Verkhovna Rada of Ukraine adopted in the first reading the project of the Law of Ukraine “On Amendments to the Tax Code of Ukraine Regarding Revising Excise Tax Rates on Tobacco Products” No. 11090, which provides for updating the excise tax growth schedule and switching to euro rates. According to the proposed changes, in 2028, Ukraine will comply with the European standard regarding the minimum level of excise duty on cigarettes of 90 euros per 1,000 cigarettes. In addition, the level of differentiation of the excise burden on cigarettes and heat-not-not tobacco products will gradually increase to 20% (excise duty on heat-not-burn tobacco products will be 20% lower than on cigarettes). Conclusions. Domestic excise innovations correspond to modern European practice and will contribute to better filling of state and local budgets. After all, on the one hand, there will be no currency risks for the state. On the other hand, the transition to heat-not-burn tobacco products, which are sold only legally, does not lead to the loss of tax revenues (which are related to illegal trade; they are equal to the amount of unpaid excise tax, VAT and retail excise duty).