Smokers dealt a double blow: what will result in a rise in cigarette prices

Tobacco lovers will increasingly have to switch to counterfeit

Since March 1, the amount of excises on tobacco products has been increased by 2%. At the same time, the minimum retail price of cigarettes will rise to 119 rubles. By tightening the fiscal burden, officials expect to throw counterfeit products from the domestic market and strengthen the health of the nation. Independent experts believe that the result may turn out to be the opposite: the number of leftist cigarettes will increase, and the Russians will not give up the bad habit of smoking.

From the spring of 2023, excise taxes on cigarettes and cigarettes will increase by 2% – up to 2.6 thousand rubles per thousand pieces. The single minimum price (UMC) was increased by 2 rubles and now it will be 119 rubles. According to officials, due to these measures it will be easier to identify “gray” products – everything that costs less than the minimum price will automatically be considered counterfeit. In addition, faced with the ever-increasing cost of cigarettes in the store, the average smoker is likely to think about giving up addictions.

Meanwhile, a counterfeit product is not necessarily highly toxic or poisonous. It’s just that it brings profit exclusively to the merchant, and the state, which earns on excise taxes, does not receive a penny. Over the past few years, officials have repeatedly raised fiscal rates on smoking products. Only from 2010 to 2020, federal budget revenues from the tax burden on this item increased 9 times. Moreover, “cigarette” duties quickly occupied the largest share in the overall structure of excise charges – more than 65%, while excise taxes on gasoline, for example, amounted to 27%, and on alcohol – only about 4%. In monetary terms, the taxation of the cigarette market began to bring the state about 600 billion rubles annually. In 2021, the increase in tobacco excise duty amounted to as much as 20%, however, in 2022, the increase was only 4%, which is three times lower than inflation.

As a result, retail products also became more expensive. Although the cost of tobacco was significantly influenced by production factors (manufacturing and personnel costs, transportation costs), taxes turned out to be the main reason for the rise in prices: over the past 10-12 years, a pack of cigarettes has risen in price by an average of 3, and for some varieties even 4 times.

If you carefully look at online news resources, you can see that reports of the detention of persons transporting tobacco products without an excise stamp appear almost daily. Here are just a few of them: on February 28, the FSB in the Oryol region detained and confiscated 11,000 counterfeit packs of cigarettes of the most popular brands from a local resident; On February 27, employees of the Ministry of Internal Affairs stopped the supply of illegal “nicotine sticks” worth more than 800 thousand rubles to the Omsk region; on the same day, the policemen of the Voronezh region found and confiscated more than 16,000 packs of various cigarettes for a total of 2 million rubles. At the same time, according to the Ministry of Industry and Trade, the share of illegal trafficking decreased from 15-16% in 2019 to 11-12% in 2021. Nevertheless, the fact is obvious: every tenth tobacco package on the domestic market is still counterfeit.

And, to all appearances, an increase in the size of excise taxes does not lead to the improvement of the nation. “Over the past five years, the number of Russian smokers has remained virtually unchanged – today a third of our compatriots start the day with a puff,” notes Alexander Balakirev, specialist at the law firm Intercessia. “The next rise in prices will stop no more than 4% of smokers, who for the most part will represent the younger generation.”

According to experts, as a result of the decisions taken since March 1, the market of illegal tobacco products in Russia will not undergo significant changes. “Before the increase in excise taxes, the average cost of a pack of cigarettes was 120-140 rubles, and counterfeit products were offered at half the price — 60-70 rubles each,” says Ivan Samoylenko, managing partner at B&C Agency. “Unfortunately, against the background of declining incomes and deteriorating living standards, many citizens prefer to save on the product line, while increasing the consumption of alcohol and tobacco.”

Nevertheless, in the near future, the state is not going to deviate from the planned tax trend: in 2024, the excise rate on cigarettes and cigarettes will increase by about 100 rubles per thousand pieces. “Prices for cigarettes are growing from year to year, and Russians practically do not feel the indexation of wages due to high inflation. Under such conditions, it is becoming more and more expensive for smokers to buy legal tobacco products, ”says Andrey Loboda, economist, director of communications at BitRiver. It is possible that as a result of the simultaneous increase in the NMC and excises, domestic producers will think about raising the selling price of tobacco by more noticeable percentages, which will ensure their previous level of profitability. As a result, the cost of a pack may increase not by 2 rubles, but by all 10-15 rubles, which will lead to additional and very painful costs for consumers.