Illicit tobacco sales ramp up: government thinks how to fight counterfeiting

Preventive measures, as always, will affect the wallets of smokers

For Russia, the topic of illegal tobacco products is still relevant. In 2022, the damage to the budget from illicit cigarette trafficking amounted to 81.5 billion rubles. And these losses happen every year. It is logical that the authorities are actively fighting counterfeit goods. For example, now the Ministry of Health has supported a 30% increase in excise taxes on cigarettes over 200 rubles. Earlier, the Ministry of Finance proposed to confiscate or completely destroy illegal tobacco. But can the measures taken lead to a reduction in the share of “leftist” cigarettes on the market? Market experts disagree. Some believe that the rise in price of a harmful product will lead to a reduction in consumption. Others are convinced that the increase in excise duty will provoke a new wave of counterfeit goods.

The government is going to raise the excise rate on cigarettes worth 200 rubles or more per pack by 30%. Money is needed to find funds to fulfill the President’s instructions in the field of healthcare. Meanwhile, now in Russia the average cost of a pack of cigarettes is 163 rubles. At the same time, the minimum price from March 1, 2023 until the end of the year is 119 rubles. for a pack. The premium segment starts from 200 rubles. Experts believe that a 30% increase in excise tax will lead to a rise in price of at least 20 rubles. per pack, or 10%.

Russia is working effectively against tobacco consumption, but there are big failures in two directions, says the chairman of the Russian Public Health Association, professor at the First Moscow State Medical University. I.M. Sechenov Andrey Demin.

“The first is low prices and excises. The second direction is the treatment of dependent people. Here we are very far behind many other states. Today, one third of the world’s population has access to smoking cessation services. There is no such thing in Russia yet,” he notes.

If we talk about raising excises and prices, then, according to the expert, today this is probably the most effective measure in the fight for public health. It turns out the Win-Win situation (“win-win”), when the country’s budget is filled, and the health of the population is protected. This is especially true for categories of citizens with low incomes – as a rule, their health is worse – and children.

“All the cries of tobacco companies about ruin, about an increase in contraband goods on the market due to an increase in excise taxes, are sheer lies. Their interests do not suffer, despite the increase in prices. The fact is that the cost of their products is extremely low. More recently, it turned out that a box of cigarettes (50 packs) shipped from the factory costs $1. It’s very cheap. Their production is non-waste. In the manufacture they use dust, artificial tobacco, they manipulate the nicotine content. Therefore, their activities continue to bring great profits, ”concludes Demin.

Meanwhile, a private investor, financial analyst Fedor Sidorov, is convinced that the current measures of state regulation of the tobacco market are completely ineffective.

The interlocutor of “MK” noted that the cost of a pack of cigarettes for the consumer does not differ – whether it is legal products or counterfeit. But their cost can vary significantly. According to Sidorov, most often for the production of “left” cigarettes, low-quality raw materials are used – tobacco and flavors of unknown origin, with unclear storage conditions and expiration dates.

“It’s all about the high excise tax. The rate on cigarettes and cigarettes from March 1 of this year is 2,603 ​​rubles per thousand pieces plus 16% of the estimated cost calculated on the basis of the maximum retail price (at least 3,536 rubles per thousand pieces). That is, the higher the excise tax, the more sense there is in counterfeiting products, since by selling them at the same price as legal ones, you can make a big profit. And in this sense, I consider state regulation measures to be completely ineffective. Moreover, the 30% increase in the excise tax on cigarettes proposed by the Ministry of Health could provoke a new wave of counterfeit goods,” he emphasizes and continues: “Those are the criminal terms and the destruction of counterfeit goods are quite effective measures. Plus, we need to strengthen control over small retail. “Left” cigarette products rarely find their way into chain stores. More often it ends up on the shelves of small retail outlets within walking distance, at non-network gas stations on highways, and so on.”

Published in the newspaper “Moskovsky Komsomolets” No. 29088 dated August 9, 2023

Newspaper headline:
Smoke screen over the tobacco market