Officials Introduce Minimum Tariffs for Tobacco
From July 1, minimum retail prices (MRP) for tobacco products begin to operate in our country. In particular, the MRC of a pack of cigarettes will amount to almost 108 rubles, of which two-thirds will be consumed by taxes. Officials are confident that the introduction of “minimum wages” for cigarettes will help to cope with the fake products flooding the domestic market. Independent experts, on the contrary, warning of the risk of a sharp influx of counterfeit products, followed by domestic smokers hoping to save money, since the average cost of a legal pack of nicotine “sticks” will jump to 140 rubles.
It will be impossible to find a pack of cigarettes cheaper than 108 rubles on the shelves of domestic stores from July 1: lower prices will indicate the counterfeit nature of the goods. Alternative types of nicotine products should also disappear from the sale, in particular, cigars, smoking mixtures, and hookah tobacco, the packages of which are not affixed with protective marking.
The basis for tobacco MRCs is the minimum rate of excise duty for 1,000 cigarettes or cigarettes, the rate of value-added tax, and an increasing coefficient of 1.4. According to Andrey Mamontov, an expert on the BCS World of Investments stock market, until recently, tobacco products rose in price by 5-10 rubles every six months. pieces), after the introduction of the MRC, the average cost of cigarettes will increase from the current 120 to 140 rubles. Moreover, only for excise taxes, manufacturers will have to pay more than 47 rubles per pack, and the total fiscal share in the cost of legal cigarettes will be exactly two-thirds – 66%.
By raising prices, industry departments hope to clear the market of counterfeit products. Earlier, on the contrary, they fought against “black” tobacco products by introducing maximum retail prices, which were not supposed to exceed the most modest retail price by 25%. True, such rules allowed “gray” traders to make money on dumping, setting prices almost half the price of excisable goods. According to the British marketing company Kantar TNS, in the first quarter of 2021, the share of illegal cigarettes in Russia increased by one and a half times – to about 11%.
“Reform of the fiscal system will eliminate cheap cigarettes from the market. Retail is likely to leave some kind of pricing gap in order to align rates later in line with the minimum bar increase. Sellers will definitely not lose, and all price costs will fall on the shoulders of consumers since the rise in prices for cigarettes and other tobacco products on average can be up to 25%, ”says Anna Bodrova, senior analyst at IAC Alpari.
Despite the fact that experts continue to consider the introduction of the MRC and labeling of nicotine products as one of the most effective tools in the fight against counterfeit products, they are not yet able to provide a full-fledged resistance to smuggling. “The gradual easing of anti-cancellation restrictions, for example regarding the opening of borders, has led to the proliferation of illegally imported tobacco products. At the same time, a sharp increase in excise duty stimulated an increase in the gap between the cost of legal goods and counterfeits. Tobacco prices are growing, but wages are not indexed at the same rate, so the demand for cheaper tobacco will increase. The counterfeit tobacco market, part of which comes from the CIS countries, will exist and grow to the extent of its capabilities, ”Mamontov is sure.
“In pursuit of an increase in the distribution of gray products, an increase in the minimum price of cigarettes will most likely damage the quality of legal products, since law-abiding manufacturers will not want to leave the profitability zone and will resume the trend of increasing selling prices across the entire product line,” says Anna Bodrova. According to her, the share of counterfeit products, as a result, risks rising by 10-20%, while the budget will not receive additional fiscal revenues. “But the consumer, on his own pocket and experience, will feel the difference: either in the price of cigarettes, if he continues to prefer“ white ”products, or in quality, if he chooses in favor of counterfeit products,” concludes the interlocutor of “Media”.