Tobacco products in Ukraine: Market state and taxation

The Ukrainian tobacco market has several characteristics that differentiate it from its peers in the EU. Today, this market faces some complex issues. There is a strong public demand to fund military needs, in light of which tackling the illicit market to raise tax revenues and increasing excise duties are being discussed. Also, Ukraine is currently undergoing its EU integration process, which requires the country to increase its excise duties on tobacco products to the EU’s minimum level. Moreover, the largest share of daily smokers is in the 18-29 age group, which indicates an adverse trend of growing prevalence of smoking among the young. Heated tobacco products (HTPs) are popular among Ukrainians. The tobacco industry lobbies for a 20% tax advantage on HTPs, compared with cigarettes; this results in lower tax revenues despite a lack of public health evidence. This landscape study seeks to analyse the current situation in the industry and provide policy recommendations to tackle today’s challenges. 

Keywords: Excise, Tobacco, Smoking, Tobacco consumption, Tax advantage

JEL classification: H20, I18, L66

Countries covered: Ukraine