12:25 09.11.2015

Tobacco producers asked to present options on reforming ad valorem, special excise duties on cigarettes to finance ministry

2 min read
Tobacco producers asked to present options on reforming ad valorem, special excise duties on cigarettes to finance ministry

Tobacco producers should present concrete proposals on reforming the ad valorem and special excise duties on cigarettes and their effect on the country's economy to the Finance Ministry of Ukraine.

"These models are to ensure a simple, transparent and fair tax system which stimulates investment and creates conditions for stable development of the national economy with synchronous provision of the needs of the national and local budgets to cover top-priority expenses," the Finance Ministry said on its website.

Finance Minister Natalie Jaresko held a working meeting on November 5 with representatives of the tobacco sector to discuss the draft tax reform drawn up by the ministry. Proposals for Ukraine and experience of Central and Eastern European countries in setting ad valorem and special excise duties were also discussed at the meeting.

Jaresko promised to do her best to find a balance between the optimal taxation and the tax administration system that will meet European standards.

Tobacco sector representatives said that it would be better to increase the specific excise duty, as it would stimulate producers to increase prices and this would increase payments to the budget. The revision of the specific excise duty rates would also help in cutting the size of the shadow market, as the general increase in the prices on the market would help to make legal sales of tobacco in Ukraine more beneficial.

As reported, according to the draft tax reform drawn up by the Finance Ministry, the specific excise duty rates will grow by 40%, and ad valorem duty – from 12% to 15%. The tax will apply to the highest retail price, including VAT (now VAT is not included). It is planned to gradually increase excise duties on tobacco by 7% every year until 2020.

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