Every seventh cigarette in Russia is declared counterfeit: how much does the budget lose on counterfeit goods?

The volume of counterfeits on the cigarette market has increased thirteen times in ten years

Illegal trade in tobacco products in Russia has grown from 1% to 13.3% over the past ten years. The consequences are dire: last year the Russian federal budget lost 100 billion rubles because of this. Moreover, this is evidenced not by officials, but by the cigarette manufacturers themselves. According to them, the government’s efforts to combat counterfeiting removed half of the illegal factories from the market, but it still failed to cope with counterfeit goods.

Ten years ago, illegal trade in tobacco products did not exceed 1% of the total market volume. But recently the situation has changed dramatically. According to the Philip Morris company, today in Russia as a whole the share of sales of illegal cigarettes has increased to 13.3%. This is not a historical high. The record was recorded in 2019 – then the illegal turnover was 15.6%. Nevertheless, the scale of counterfeits is impressive: treasury losses from the illegal smoking market last year alone amounted to at least 100 billion rubles. In the current economic realities, taking into account the budget deficit, this is a huge figure.

The state, of course, is taking legislative measures to “whiten” the national market for the production of tobacco products. From the spring of 2023, excise taxes on cigarettes and cigarettes increased by 2% – to 2.6 thousand rubles per thousand pieces. Now the minimum pack costs at least 119 rubles. According to officials, due to such measures it will become easier to identify “gray” products: everything that costs less than the minimum price will automatically be considered counterfeit. Such measures seem to be beneficial: from 2010 to 2020, federal budget revenues from the tax burden under this item increased 9 times. “Cigarette” duties immediately took a significant share in the overall structure of excise taxes – in monetary terms, taxation of the cigarette market brings the state about 600 billion rubles annually.

True, the decisions of officials did not make it any easier for smokers. Although the cost of tobacco was significantly influenced by production factors (production and personnel costs, transportation costs), the main reason for the rise in prices turned out to be taxes: over the past 10-12 years, a pack of cigarettes has risen in price by an average of 3, and for some varieties, 4 times. Many began to reorient themselves towards dubious, “excise-free” packaging. Hence the significant increase in counterfeit goods!

Moreover, as experts believe, counterfeit goods are not always highly toxic or poisonous for the user. Its main disadvantage is that the sale of such products brings profit exclusively to the seller, but not to the state. Cigarettes “without excise taxes”, as well as those with government stickers, are equally harmful to health. “Before the increase in excise taxes, the average cost of a pack of cigarettes was 120-140 rubles, and counterfeit goods are offered at half the price – 60-70 rubles,” says managing partner of B&C Agency Ivan Samoilenko. “Against the background of declining incomes and deteriorating living standards, many citizens prefer to save on the product line without reducing tobacco consumption.”

Meanwhile, the detention of persons transporting smoking products without a tax stamp occurs almost every day. Here are just some news: in Khakassia, traders were caught for illegal tobacco on a particularly large scale – more than 88 thousand packs of counterfeit goods worth 10.5 million rubles; in Rostov, employees of the Ministry of Internal Affairs seized more than 1.5 thousand packs of cigarettes worth 220 thousand rubles from illegal circulation; In the Stavropol region, local police detained criminals who were found in possession of more than 15 thousand packs of cigarettes worth 2 million rubles…

Nevertheless, the fact is clear: almost every seventh tobacco package on the domestic market is still counterfeit. “Cigarette prices are rising from year to year, and Russians practically do not feel the indexation of wages due to high inflation,” notes BitRiver Communications Director, economist Andrei Loboda. “Under such conditions, it is becoming increasingly expensive for smokers to buy legal tobacco products. Domestic producers, due to the growing fiscal burden, will have to think about raising the selling price of their goods, and the consumer will again be forced to pay more attention to the “gray” tobacco market.”