RESEARCH PAPER
"The lobbying strategy is to keep excise as low as possible" - tobacco industry excise taxation policy in Ukraine
 
More details
Hide details
1
Alcohol and Drug Information Centre (ADIC-Ukraine), Kyiv, Ukraine
Publish date: 2010-08-31
 
Tobacco Induced Diseases 2010;8(August):10
KEYWORDS:
ABSTRACT:
Background:
Tobacco taxes are one of the most effective ways to reduce tobacco use. Transnational tobacco companies (TTCs) claim they wish to develop and secure excise systems that benefit both governments and the profitability of the companies themselves. The objective of the paper is to use the case of Ukraine, with its inconsistent history of excise tax changes in 1992-2008, to explore tobacco industry taxation strategies and tactics, and their implications for governmental revenues.

Methods:
Details of tobacco industry policy on tobacco taxation in Ukraine were obtained by searching tobacco industry internal documents and various published reports.

Results:
: Even before entering the market in Ukraine, TTCs had made efforts to change the excise system in the country. In 1993-1994, TTCs lobbied the Ukrainian Government, and succeeded in achieving a lowering in tobacco tax. This, however, did not produce revenue increase they promised the Government. In 1996-1998, Ukrainian authorities increased excise several times, ignoring the wishes of TTCs, caused significant growth in revenue. Due to TTCs lobbying activities in 1999-2007 the tax increases were very moderate and it resulted in increased tobacco consumption in Ukraine. In 2008, despite the TTCs position, excise rates were increased twice and it was very beneficial for revenues.

Conclusions:
The Framework Convention on Tobacco Control includes provisions both on tobacco taxation policy and on protection of public health policy from vested interests of tobacco industry. This paper provides arguments why tobacco taxation policy should also be protected from vested interests of tobacco industry. TTCs taxation strategy appears to be consistent: keep excise as low as possible. Apparent conflicts between TTCs concerning tax structures often hide their real aim to change tax structures for competing interests without increasing total tax incidence. Governments, that aim to reduce levels of tobacco use, should not allow tobacco companies to influence the development and implementation of tobacco taxation policy.

CORRESPONDING AUTHOR:
Konstantin S Krasovsky   
Alcohol and Drug Information Centre (ADIC-Ukraine), Vishnyakovskaya Str., 13-212, Kyiv, 02140, Ukraine
 
REFERENCES (55):
1. World Health Organization: WHO Report on the Global Tobacco Epidemic, 2008 - The MPOWER package. 2008, Geneva: WHO.
2. Gilmore A, McKee M: Tobacco and transition: an overview of industry investments, impact and influence in the former Soviet Union. Tob Control. 2004, 13: 136-42. 10.1136/tc.2002.002667.
3. Gilmore A, McKee M: Moving east: how the transnational tobacco companies gained entry to the emerging markets of the former Soviet Union. Part I: Establishing cigarette imports. Tob Control. 2004, 13: 143-50. 10.1136/tc.2003.005108.
4. Gilmore A, McKee M: Moving east: how the transnational tobacco companies gained entry to the emerging markets of the former Soviet Union. Part II: an overview of priorities and tactics used to establish a manufacturing presence. Tob Control. 2004, 13: 151-60. 10.1136/tc.2003.005207.
5. Gilmore AB, McKee M: Exploring the impact of foreign direct investment on tobacco consumption in the former Soviet Union. Tob Control. 2005, 14: 13-21. 10.1136/tc.2003.005082.
6. Krasovsky K, Andreeva T, Krisanov D: The economics of tobacco control in Ukraine from the public health perspective. 2002, Kiev: Alcohol and Drug Information Centre (ADIC-Ukraine).
7. Herter , Ulrich : "Keynote Speech to the World Tobacco Symposium, Wednesday 22nd September 1993 Ulrich Herter Managing Director Tobacco BAT Industries Plc". 1993, Bates: 202232545-202232563 (accessed 5 October 2009), [http://tobaccodocuments.org/ba...].
8. Consumer & Regulatory Affairs 1998 Plan Guidelines. Bates 770004490-770004492 (accessed 15 April 2010), [http://legacy.library.ucsf.edu...].
9. Campbell R, Balbach ED: Mobilising public opinion for the tobacco industry: the consumer tax alliance and excise taxes. Tob Control. 2008, 17: 351-356. 10.1136/tc.2008.025338.
10. Hiilamo H: Tobacco industry strategy to undermine tobacco control in Finland. Tob Control. 2003, 12: 414-23. 10.1136/tc.12.4.414.
11. Szilágyi T, Chapman S: Tobacco industry efforts to keep cigarettes affordable: a case study from Hungary. Cent Eur J Public Health. 2004, 11 (4): 223-228.
12. Gilmore A, Collin J, Townsend J: Transnational Tobacco Company Influence on Tax Policy During Privatization of a State Monopoly: British American Tobacco and Uzbekistan. Am J Public Health. 2007, 97: 2001-2009. 10.2105/AJPH.2005.078378.
13. Carter SM: Tobacco document research reporting. Tob Control. 2005, 14: 368-76. 10.1136/tc.2004.010132.
14. Bingham P, B.&W.: "Key Area Paper. Excise Taxation of Tobacco Products". 1992, Bates: 699138223-699138248. (accessed 15 March 2010), [http://tobaccodocuments.org/bw...].
15. PMI, Philip Morris International: EEMA Region Situation Assessment. 2500108132/8147. (accessed 17 April 2010), [http://legacy.library.ucsf.edu...].
16. Ukraine Business Plan. 1992, Bates: 301738700-301738783. (accessed 5 October 2009), [http://tobaccodocuments.org/ba...].
17. BAT Industries, van Waay A: "Ukraine - Marketing". 1992, Bates: 301689859-301689861. (accessed 5 October 2009), [http://tobaccodocuments.org/ba...].
18. Van Waay A: "Ukraine". 1992, Bates: 301689855-301689858. (accessed 5 October 2009), [http://tobaccodocuments.org/ba...].
19. Van Waay A: "Ukraine Marketing Section". 1992, Bates: 301689862-301689864. (accessed 5 October 2009), [http://tobaccodocuments.org/ba...].
20. "Document WHO184". No date. (accessed 5 October 2009), [http://tobaccodocuments.org/ps...].
21. 36-page document: CATEGgRy[ Mainline In te'national Brands". Bates: 502584297-502584332. (accessed 5 October 2009), [http://tobaccodocuments.org/gu...].
22. Herter , Ulrich : Proposed Investment in Ukraine. Bates 19920827 202209337 (accessed 15 April 2010), [http://legacy.library.ucsf.edu...].
23. Johnson Anne: Note from Anne Johnson to U Herter enclosing Ukraine briefing note for meeting with president Kravchuk. Bates 19930205 (accessed 15 April 2010), [http://legacy.library.ucsf.edu...].
24. Letter regarding investment in the tobacco industry of Ukraine. 1993, Bates 203463463-203463465. (accessed 15 April 2010), [http://legacy.library.ucsf.edu...].
25. "20-page document". No date. Bates: 203826349-203826368. (accessed 5 October 2009), [http://tobaccodocuments.org/gu...].
26. R S: "New Tobacco Markets". 1992, Bates: 203475321-203475329. (accessed 5 October 2009), [http://tobaccodocuments.org/ba...].
27. Deloitte , Touch : Research of possible ways to increase State budget revenues from tobacco products taxation in Ukraine (in Ukrainian). 1995, Kiev.
28. Eastern Economist: Not Generating Revenue?. 1995, Bates 700587793 (accessed 17 April 2010), [http://legacy.library.ucsf.edu...].
29. Company Plan Ukraine 1997-1999. Bates 800193399-800193409 (accessed 18 April 2010), [http://legacy.library.ucsf.edu...].
30. Griscom TC: "Following Are Highlights of October External Relations Activities and Issues Worldwide". 1997, Bates: 527892328-527892335. (accessed 5 October 2009), [http://tobaccodocuments.org/rj...].
31. Barbaerlitz T: "Weekly Highlights, 980427 - 980501". 1998, Bates: 2074651753-2074651756. (accessed 5 October 2009), [http://tobaccodocuments.org/pm...].
32. Note regarding changes and additions to some Ukrainian laws. Bates 321212901. (accessed 15 April 2010), [http://legacy.library.ucsf.edu...].
33. "Pmi Corporate Affairs Weekly Highlights by Region Week of 990531". 1999, (est.). Bates: 2078787828A-2078787836. (accessed 5 October 2009), [http://tobaccodocuments.org/pm...].
34. "Weekly Highlights for Week of 990712". 1999, (est.). Bates: 2065537043-2065537049. (accessed 5 October 2009), [http://tobaccodocuments.org/pm...].
35. BAT: Cross Regional CORA Conference. Warsaw 28-30 June. 2000, Bate 760072518. (accessed 16 April 2010), [http://legacy.library.ucsf.edu...].
36. CORA Budget Proposals for 1999. Bates 321212896-321212897 (accessed 19 April 2010), [http://legacy.library.ucsf.edu...].
37. "Excise and Trade Issue - European Region Quarterly Highlights - Excise 3rd Quarter 1999". No date. Bates: 325420279-325420280. (accessed 5 October 2009), [http://tobaccodocuments.org/ba...].
38. British-American Tobacco Company Limited: Smuggling: Our View 16 February 2000. Bates 322048732-322048933 (accessed 18 April 2010), [http://legacy.library.ucsf.edu...].
39. BAT: Cross Regional CORA Conference. Warsaw 28-30 June. 2000, Bate 760072528. (accessed 16 April 2010), [http://legacy.library.ucsf.edu...].
40. BAT Ukraine: "Section 1 Audit Committee Meeting July 26, 2000". No date. Bates: 325411887-325411891. (accessed 5 October 2009), [http://tobaccodocuments.org/ba...].
41. Kiryakova A: It would be unprofitable to Ukrainian producers to issue expensive and quality products (in Russian). Delovaya nedelya newspaper, 40, November 13-19. 2003, (accessed 9 August 2008), [http://www.liga.kiev.ua/smi/sh...].
42. Imangulov T: Smoke? OK! (in Russian). Profile of Ukraine. 2004.
43. Salivon S, Zaitzev A: Born dead (in Russian). Business newspaper. 2004.
44. Perets V: To whom "to smoke" is expensive (in Russian). From-UA site. 2005, (accessed 9 August 2008), [http://www.from-ua.com/eco/eco...].
45. Anonymous: The tobacco people are nervous. The discussions around of a nicotinic question have sharply worsened parameters of domestic tobacco industry (in Russian). Business capital newspaper. 2006, 24 (264): (accessed 9 August 2008), [http://www.dsnews.ua/markets/a...].
46. Anonymous: Participants of Ukrainian tobacco markets expressed optimistic reaction on the Ministry of Finance initiative to increase cigarette excise duty (in Ukrainian). Seychas newspaper. 2007, (accessed 9 August 2008), [http://times.liga.net/articles...].
47. Andreeva TI, Krasovsky KS: Changes in smoking prevalence in Ukraine in 2001-5. Tob Control. 2007, 16: 202-6. 10.1136/tc.2006.019588.
48. Pashkevich O: Parliament has agreed to raise the tobacco products duty (in Russian). Akcyz site. 2008, (accessed 9 August 2008), [http://akcyz.com.ua/news/tobac...].
49. Prilutskiy tobacconist (in Ukrainian). Delo newspaper. 2008, (accessed 19 August 2008), [http://delo.ua/news/82860/].
50. Tchebotaryov K: Government gives light (in Ukrainian). DailyUA. 2008, (accessed 19 August 2008), [http://www.daily.com.ua/articl...].
51. "CORA Europe Regional Split - Eastern Europe". No date. Bates: 321215633-321215639. (accessed 9 August 2009), [http://tobaccodocuments.org/ba...].
52. British-American Tobacco Company Limited: Future Business Environment. 2001, Bates 324537933-324538045 (accessed 17 April 2009), [http://legacy.library.ucsf.edu...].
53. Chaloupka FJ, Cummings KM, Morley CP: Tax, price and cigarette smoking: evidence from the tobacco documents and implications for tobacco company marketing strategies. Tob Control. 2002, 11 (suppl 1): i62-72. 10.1136/tc.11.suppl_1.i62.
54. British-American Tobacco Company Limited Bulgaria, Marshall , Adrian : "Future Business Environment -1999". 1999, Bates: 325049767-325049885. (accessed 5 October 2008), [http://tobaccodocuments.org/ba...].
55. World Health Organization: WHO Framework Convention on Tobacco Control. Guidelines for implementation Article 5.3; Article 8; Article 11; Article 13. 2009, Geneva: World Health Organization.
 
CITATIONS (7):
1. Change in tobacco excise policy in Bulgaria: the role of tobacco industry lobbying and smuggling
Valeria Skafida, Karin E Silver, Boika P D Rechel, Anna B Gilmore
Tobacco Control
2. Tobacco taxation: the importance of earmarking the revenue to health care and tobacco control
Constantine I Vardavas, Filippos T Filippidis, Israel Agaku, Vasileios Mytaras, Monique Bertic, Gregory N Connolly, Yannis Tountas, Panagiotis Behrakis
Tobacco Induced Diseases
3. Regulating duty free sales and tobacco advertising in airports: a call for action
Constantine I Vardavas, Andrew B Seidenberg, Gregory N Connolly
Tobacco Induced Diseases
4. Term limits and the tobacco industry
Dorie E. Apollonio, Stanton A. Glantz, Lisa A. Bero
Social Science & Medicine
5. The passage of tobacco control law 174 in Lebanon: reflections on the problem, policies and politics
R T Nakkash, L Torossian, T El Hajj, J Khalil, R A Afifi
Health Policy and Planning
6. Tobacco industry globalization and global health governance: towards an interdisciplinary research agenda
Kelley Lee, Jappe Eckhardt, Chris Holden
Palgrave Communications
7. Tobacco Industry Manipulation of Tobacco Excise and Tobacco Advertising Policies in the Czech Republic: An Analysis of Tobacco Industry Documents
Risako Shirane, Katherine Smith, Hana Ross, Karin E. Silver, Simon Williams, Anna Gilmore, Thomas E. Novotny
PLoS Medicine
eISSN:1617-9625