High excise tax on cigarettes spur illegal traffic

Increase of the Kazakhstan excise tax on cigarettes has triggered an increase in illegal traffic from Kyrgyzstan in 2013, according to the report provided by one of Kazakhstan-based tobacco companies to tengrinews. 

The excise tax on cigarettes was almost doubled - increased by 94% - on January 1, 2014, which increased the cost of one cigarette pack by 30 tenge. The increase was pretty tangible for the citizens smoking cheap and mid-range cigarets, according to the company. Besides, it is expected that the gradual increase of the excise duty will continue and reach 45 Euro per thousand items by 2020. According to the tobacco company, the excise duty currently make from 23% to 40% of the cost of the cigarettes, depending on their price segment.

"After the previous increase - a 25% raise of the excise tax in January 2013 - the illegal trafficking of cigarettes from the neighbouring countries to Kazakhstan increased by an averagely of 21%," the tobacco company said adding that Kyrgyzstan was the traditional source of illegal traffic of tobacco for Kazakhstan.

"Only recently a large batch of counterfeit cigarette worth over 2 million tenge ($12.9 thousand) was seized in Zhambyl Oblast in southern Kazakhstan. There had been no a seizures of that scale during the 3 preceding years (when the excise tax was lower)," the company added.

Meanwhile, the Custom Control Committee of the Finance Ministry of Kazakhstan reported that there were two cases of illegal import of cigarettes to the territory of the Customs Union (Kazakhstan, Belarus and Russia) in 2013. 740 packs of cigarettes were seized in those two cases (this amount is worth much less that the figures given by the tobacco company). The Custom Committee confirmed that illegal goods originated in Kyrgyzstan and that no seizures of illegal cigarettes were made in 2012. 

However, the tobacco company shares the opinion that the sector should be regulated and the excise duty on tobacco production can go only up, not down. "But, the plans to bring the retail price of a cigarette pack to 500 tenge ($3.2) supposed by anti-tobacco organizations, are in our opinion economically groundless and unacceptable in terms of the people's purchasing power in Kazakhstan. Sharp escalation of prices will only spur the flow of illegal goods and destabilize the legal market," the producer said.

For more information see:http://en.tengrinews.kz/markets/High-excise-tax-on-cigarettes-spur-illegal-traffic-25792/?
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