Tobacco companies supported this decision; for instance, on the voting day, many media aired similar news with tobacco companies’ representatives praising deputies for being “balanced”. Before the voting, media aired similar news with comments by the experts trying to speculate on the topic of war, refugees, senior citizens and portraying horrors that could take place in case Verkhovna Rada did pass the law.
It was for the first time that tobacco companies received that much media coverage after a long time. After the industry lost a war against implementation of the laws prohibiting advertising and smoking in public places, it decreased its presence in the media. So then, there was a sudden attention outburst in the end of July.
We analyzed materials that had lobbying character, determined the main messages and broke the myths that the industry tried to spread among the audience.
Three big myths
Gazeta.ua, UNN, UNIAN, TSN.ua, RBK, “Vysokyi Zamok”, “Ekspres”, “Glavcom” printed pretty much identical news about cigarettes getting twice as expensive, and it would lead to the increasing amount of contrabandist production and “give additional profit to Russian contrabandists”, “decrease life level for the poorest people [senior citizens – Ed.]”, as well as lower the amount of money that gets into the state’s budget.
These three statements were repeated many times by tobacco companies and lobbyists whenever somebody raised a topic about increasing excises. In the previous materials, we repeatedly denied them. It is quite easy to do since all you need is to understand the minimum about the topic: browse panic "expert" predictions of the previous years and find out that they did not come true, look at the positive dynamics in excise revenue to the budget in recent years, and compare it to what the lobbyists say...
It is also useful to Google names of experts whose comments appear in many materials. Then, we can find out, for example, that Professor Valeriy Vorotin from the Institute of Legislation of Verkhovna Rada is always against increasing excises. Since 2009, he predicted a "threat of smuggling cigarettes from Russia after a sharp increase of excises on cigarettes," and he said the same in 2011 and 2013. Did the predictions come true?
Cigarette smuggling did not take place on the scale that was predicted. Even despite a certain increase in the amount of untaxed cigarettes, the government revenues systematically increased, and the number of smokers as well as produced and consumed cigarettes decreased, and consequently - the law worked (for details – see presentation).
We do not want to tire you with boring calculations that once again prove the falsity of the arguments made by the tobacco lobbyists. Extensive analytics on the matter - with numbers, statistics, and extracts from official documents – are regularly prepared by Konstantyn Krasovskyi, the Head of the Tobacco Control Institute for Strategic Studies under the Ministry of Health of Ukraine.
Here are some of the articles by Mr. Krasovskyi that are important for understanding the situation: "Vital excise duty" (09.20.2013, "Dzerkalo Tyzhnia"), “Smuggling cigarettes – to and where from, and how to fight it in Ukraine" (22.08.2012, "Dzerkalo Tyzhnia"), “Let excises grow"(02.02.2010, “Ekonomichna Pravda”), “Myths about contraband cigarettes0 "(04.12.2009, “Ekonomichna Pravda”).
In his last publication "The government filters excises" (08.08.2014, “Glavcom”), Krasovskyi used the official statistics to debunk the myths about the latest excise announced in the media at the end of July (we double-checked his arguments and rely on them in this article, too).
In particular, he debunks the words of Valeriy Vorotin that "cheap Russian cigarettes" “Don tobacco” are being actively imported into Ukraine (including ATO zone) and illegally sold in markets across the country. The sharp rise in cigarettes without filters in Ukraine will bring additional profit for Russian smugglers."
"According to the website of the Federal Tax Service, “Don tobacco” does not even produce cigarettes without filters, and cheap filter cigarettes of the brand«Beverly» there cost 45 rubles (15 UAH ) (as for July 2014). According to the State Fiscal Service of Ukraine, the cigarettes of this brand are legally imported into Ukraine by the Dnipropetrovsk company "Vega-plus", and in July 2014, a legal pack of cigarettes «Beverly» was established with a maximum retail price of 6.80 UAH. Thus, there is no sense in buying these cigarettes in Russia for the illegal supply in Ukraine,"- says Konstantyn Krasovskyi.
Consultations with the tobacco industry
Among all pro-tobacco materials, the most questions are about the text in Gazeta.ua called “Cigarettes will get twice as expensive in September?” that was published without stating the author’s name, the source of the information, and only on the Russian (not starting) version of the site. The style of the material is different from other materials, and contains evaluative judgments that are not common for Gazeta.ua, too. The same text, but in Ukrainian, with a different title and Olha Petriv as the author, was published on the same day on the UNN website.
The material complains that the initiative to increase the excise tax "appeared without any prior consultations with the tobacco industry, and without analyzing the social and economic impact and more suitable alternatives to increase the revenues from the tobacco industry." However, for some reason, the authors do not mention the need to include the health care representatives for the consultation.
The authors also forget about the fact that, in accordance with paragraph 3 of Article 5 of the ratified Framework Convention on Tobacco Control, the tobacco industry can not have access to the development of legislative initiatives to combat smoking. And the increase in excises is recognized by the UN as one of the most effective ways to counter smoking; thus, it should be considered, especially in this situation.
Careless increase of excises
"The initiative of the Ministry of Finances” to equalize excise taxes on cigarettes without and with filter did not appear out of the blue. This is a worldwide practice. In EU countries, it works in accordance with paragraph 2 of Article 7 of Directive 2011/64/ES. Plus, the Association Agreement between Ukraine and the EU contains Article 352 which provides for the gradual convergence of excise taxes on tobacco products to the European level with minimum excise tax on 1000 cigarettes in EU is 64 Euros, and by 2018, it will reach 90 Euros. In Ukraine, it is 18 Euros for filter cigarettes, and 8 Euros for non-filtered.
It is also important that Ukraine may remain the only country where the non-filter cigarettes are so cheap. And thus, smuggling will increase because the cigarettes will be imported not to, but out of Ukraine. For example, Russia equalized excise taxes on cigarettes in 2012 making them reach 1040 rubles (350 UAH). In 2014, Kazakhstan did the same, and starting from 2015, Belarus and Moldova will join.
...As a result, we begin to think that the materials we mentioned could have paid news features. However, it can be much simpler: the newsrooms happily make news using press releases, and they could use someone's statement or comment as an informational cause. This approach greatly simplifies the maintenance of lobbying information wars because it is enough to write a text with comments of some experts and send it to the editorial mails. Some will print it, and some will reprint. Not all of the information is being checked, and the newsrooms do not take comments of other parties involved in the issue to comply with the balance of opinions and get to the truth.Tobacco companies supported this decision; for instance, on the voting day, many media aired similar news with tobacco companies’ representatives praising deputies for being “balanced”. Before the voting, media aired similar news with comments by the experts trying to speculate on the topic of war, refugees, senior citizens and portraying horrors that could take place in case Verkhovna Rada did pass the law.