Smuggling: Tobacco

Tobacco products, in particular cigarettes, are a traditional contraband article. The reason is plain to see: a great part of the price of the end product is
accounted for excises and taxes. Therefore, depending on the tax policy of different countries, the price of a pack of cigarettes of the same brand may differ several-fold. It is quite natural that both residents of border territories, who pass small batches of cigarettes for sale, and representatives of criminal networks are trying to make money from this.

A large tax component in the price and relatively low cost incentivize another type of illegal activity – the manufacturing of counterfeit products and/or the use of tax evasion schemes in the manufacturing of tobacco products. On the other hand, from the point of view of the state, tobacco taxes are one of the main sources of replenishment of the treasury. For example, the budget of Ukraine for 2020 assumed 57 billion UAH of excise tax revenues from tobacco products produced in the country and another 1.45 billion – from imported ones.

This is 5.9% of the budget revenue or 11% of the total expected tax revenue for the current year. Besides the abovementioned amounts, we should also add the factor of attracting foreign currency to the country – the revenues from the export of tobacco products from Ukraine in 2019 amounted to $497.1 million.

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