Ukrainian Association of Tobacco Ukrtyutyun an open letter to members of the Committee of Verkhovna Rada of Ukraine on the budget, which expresses its concern about government initiatives to enhance the rates of taxes on tobacco products.

In an open letter signed by Director General of the Association Valentina Khomenko, which is transmitted to UNIAN notes that August 12, 2009 the Cabinet of Ministers of Ukraine submitted a proposal to BP Ukraine to improve on 1 October 2009, ad valorem component of excise duty on tobacco from 20 to 36 per cent of the turnover of the realization of maximum retail prices established by an amendment to the draft Law of Ukraine On amending the Law of Ukraine On State Budget of Ukraine for 2009 (reestr. number 4707 number of 24.06.2009 town) in the preparation of his a second reading.

Manufacturers of tobacco products is extremely concerned about the initiatives on the tax changes to the requirements of the Constitution and laws of Ukraine, which, unfortunately, have become systematic and practically nullify the possibility of sustainable and predictable production and investment activities, noted in a letter to MPs.

According to the manufacturers of tobacco products, the above decision to endorse the violation of: the principles of construction of the tax system (Part 8 of Article 1 and Article 7 of the Law of Ukraine On the tax system), among which - the continuity of tax rates and collections (obligatory payments) to Throughout the budget year; paragraph 3 of Article 27 of the Budget Code of Ukraine concerning the entry into force of the laws that affect the formation of the revenue or expenditure budget, the decision of the Constitutional Court of Ukraine from May 22, 2008 number 10-rp/2008 (case on the subject and contents of the Bill on the State Budget of Ukraine) on the inadmissibility of making the law of the State Budget of Ukraine of changes to other laws, Article 116 of the Rules of the Verkhovna Rada of Ukraine on the timing for submission of proposals in the bill, which is preparing for its second reading.

authors of the letter point out that haste with which it was approved by the reported decision not allowed to objectively analyze the situation and make sure that as a result of unpredictable and economically unjustified excise policy in Ukraine, a sample of 2009, is the destruction of the legal tobacco market transparency and the formation of an illegal with all its evils.

Association Ukrtyutyun notes that as a result of the dramatic, more than doubled, increasing the rates of excise duty from 1 May, 2009 prices on cigarettes, on average, increased by 1,5-2 grn., or by 20-30% . These price increases, due to the fact that Ukraine is the penultimate place in Europe in the rating of the purchasing power of the population, could not affect the amount of the legal market of tobacco products.

Association gives the State Statistics Committee, according to which the volume of tobacco production in Ukraine decreased from May to July 2009 to 25 percent, and sales, according to the Association, more than 27 percent, compared with same period last year. In doing so, the demand for tobacco products and their consumption remained almost unchanged.

Instead, the information law enforcement officials on the identification of illegal production and smuggling of tobacco products to indicate that part of the Ukrainian population has moved to the consumption of illegal products, note the authors of open letters. As a result of an increase in the rates of excise duty has increased the activity of enterprises, which are illegally using intellectual property rights and produce counterfeit products. A significant difference in the tax burden on tobacco products in Ukraine, compared with Russia and Moldova, an economic basis for large-scale smuggling of goods into Ukraine.

However, note manufacturers of tobacco products have not been fulfilled predictions initiating an increase in the rates of excise tax on tobacco products in May this year (the Law of Ukraine on March 31, 2009 № 1201-VI) on the excise tax revenue to the State Budget of Ukraine. The actual excise tax revenue from manufactured and imported tobacco products in Ukraine for the period May-July 2009 amounted to about 65 percent of predicted.

authors of the letter to notice that the increase in excise tax revenues, which now occurs, is temporary, since the losses of state and society from tenezatsii tobacco market will be much more and will not be offset by raising taxes. Illegal dealers do not pay taxes and do not comply with requirements of laws concerning health warnings, prohibition of the sale to minors, and the like, the authors note the letter.

According to the Association Ukrtyutyun , an initiative on the regular rate increases excise tax would result in a further increase in tobacco prices by an average of 25 percent, which only reinforce the negative trends in the tobacco market of Ukraine. In addition, the increase in prices will stimulate Ukrainian consumers to consume more cheap tobacco products, which did not provide additional revenue to the state budget by increasing the ad valorem component of excise duty, as it is calculated as a percentage of the turnover of sales, based on the established maximum retail price.

This policy of the tobacco industry, which, according to the GNA of Ukraine, paying to the state budget of Ukraine more than 55 percent of the total excise tax revenue from all excisable goods, in our opinion, does not meet the declared interests of the state, society and business , - the open letter.

view of the foregoing, the Association «Ukrtyutyun» Requests deputies «prevent the continuing violations of the laws of Ukraine and the adoption of hasty decisions without careful analysis of the effects of previous decisions to enhance the excise duty». Manufacturers of tobacco products is also asked to express their views with the Committee's consideration of the issues raised.