The RPR Coalition joins the statement of the Center for Civic Representation “Life” on the inadmissibility of creating an excise preference for heating tobacco products in the draft law No. 11090.

We support the harmonized increase in excise rates on tobacco products and the transition to taxation in euros, as this decision allows us to fulfill our European integration obligations, strengthen the protection of children and youth from tobacco use, and fill the military budget of Ukraine. At the same time, it is unacceptable to adopt Draft Law 11090 in its entirety if its provisions include an excise preference for heating cigarettes (HTP), which in the first reading version is set at 20% compared to cigarettes.

We call on the members of the relevant Committee on Finance, Taxation and Customs Policy to eliminate the tax preference for HTPs in Draft Law 11090 and maintain the current effective policy of harmonized excise tax increases. 

In 2021, the Verkhovna Rada of Ukraine harmonized excise taxes on HTPs, cigarettes and cigarillos to the same level, which resulted in a 6-fold increase in excise revenues to the state budget in just one year (from UAH 1.7 billion in 2020 to UAH 10.2 billion in 2021) and reached UAH 14.4 billion in 2023.

According to the estimates of the NGO “Life”, the creation of a 20% excise preference for HTPs will result in a shortfall of up to UAH 3 billion in the State Budget of Ukraine in 2025 and EUR 427.9 million (or UAH 18.6 billion) in 2025-2028. With each subsequent year, the budget will lose at least UAH 7 billion.

Contrary to Ukraine’s interests, these funds from the pockets of citizens will go to tobacco companies, 2 of which are international sponsors of the war, who paid more than $8 billion to the Russian budget in the first year of the great war alone.

The WHO emphasizes that heating tobacco products are tobacco products and states: “Given the relative homogeneity of the tobacco inserts used in HTPs, these products should be taxed at the same rate as regular cigarettes.”

National studies show that the promotion of heated tobacco products leads to the involvement of new consumers in the tobacco use epidemic, especially young people.

We propose to consider the possibility of achieving the requirements of European Integration Directive 2011/64/EU of 90 euros per 1000 pieces by 2026 instead of 2028 as proposed in the model of the draft law No. 11090. 

In this case, the State Budget of Ukraine for 2025-2028 will receive 742 million euros (32 billion hryvnias) more compared to the model of the draft law No. 11090, which provides for the achievement of the minimum excise duty on cigarettes and cigarillos in 2028 and creates a 20% excise preference for heating tobacco products.

Experts of the Vienna Institute for International Economic Research have modeled the provisions of the draft law No. 11090 adopted in the first reading, which demonstrated that the proposed model with excise preferences and a delayed period for reaching the rate of 90 euros per 1000 pieces will lead to a resumption of the growth of the tobacco use epidemic after 2026.

Important, the European Commission is revising the Tobacco Excise Tax Directive and is considering setting the minimum excise tax rate at EUR 180 per 1000 units. It should be noted that the average excise tax in the EU countries is already 177 euros per 1000 pieces.

An effective policy of raising excise taxes on tobacco products, which is supported by the majority of citizens, will allow filling the state budget with profits coming from harmful, unnecessary goods and save thousands of lives from premature death, which is crucial for restoring Ukraine’s demographic potential.