Cabinet initiates revision of tobacco excise duties as Ukraine violates liabilities on DCFTA with EU

The government will send a bill on the increase of the ad valorem rate of the excise duty on cigarettes to 15% of largest retail prices with VAT in 2016 and on revoking the requirement on the bottom retail prices.

"The introduction of bottom retail prices is not in line with EU legislation. We've received a letter from the EU Delegation where they clearly say that this does not coincide with our liability under the Association Agreement. It is proposed that the ad valorem rate of the excise duty is increased by 3 percentage points, from 12% to 15%," Finance Minister Natalie Jaresko said at a cabinet meeting.

She said that the proposed bill will duplicate the imitative of the government that was submitted to the parliament before voting the 2016 national budget and amendments to the Tax Code in December 2015.

As reported, after amending the Tax Code in late 2015, the specific rate of the excise duty on cigarettes grew by 40% from January 1, 2016, to UAH 318.26 per 1,000 cigarettes without the increase of the ad valorem

Additionally, it is foreseen that the bottom retail prices are introduced. The cabinet is to define the procedure for setting their size.