Tobacco manufacturers have proposed to introduce a minimum price on cigarettes

© Fotolia / DoraZettПродажа cigarettes. Archival photoTobacco manufacturers have proposed to introduce a minimum price on cigarettes© Fotolia / DoraZett

Tobacco manufacturers Philip Morris International (PMI) and Japan Tobacco International (JTI) propose to introduce in Russia the minimum retail price (MRTS) on cigarettes, the newspaper «Kommersant».

So, PMI June 29, asked the first Vice-Premier Igor Shuvalov with the proposal to introduce a minimum retail price for cigarettes. It is stated in the letters JTI and the Association «Tabakprom», directed to the Director of the Department of tax and customs policy of the Ministry of Finance Alexey Sazanov 29 and 31 July, the newspaper said. JTI has supported the idea of a competitor, the company proposes to all cigarettes operated a single minimum price, which was 75% of weighted average MRP of the previous year.

Now in Russia operates only MRC that the tobacco companies themselves set for each SKUs. Above this price they can’t be sold either in retail or in food service establishments. The law prohibits selling cigarettes cheaper than 25% of the installed MRC. A single minimum retail prices for tobacco products does not exist today. Thus it is with MRC tobacco companies pay the ad valorem part of the excise tax (currently 14.5% of MRC), the newspaper notes.

In the letter Sazanov Vice President, corporate Affairs JTI Sergey Kiselev calls the current arrangement is inefficient, as it cigarette manufacturers can bring to market products with arbitrarily low MRC. As noted in the JTI, now in Russia the structure of the tobacco market shifted towards cheaper price segments, leading to a shortfall of budget revenues.

Assessment PMI, now the average price of cigarettes in Russia is 88 roubles for a pack. Thus, if JTI’s proposed mechanism for determining MRC was supported, in 2018, cigarettes could be cheaper than 66 rubles. In JTI believe that this measure will not affect the interests of legal producers of cigarettes, as the minimum retail price will be below 99% of quotations of cigarettes in low-price segment, which paid all excise taxes.

«Tabakprom» (JTI except it also includes «BAT Russia», «Donskoy Tabak», Imperial Tobacco), in turn, wrote Casanova that changing the existing mechanism of setting minimum retail prices is not supported by the majority of members of the Association. The letter said that such a change would reduce the affordability of cigarettes and, as a consequence, on the contrary, will increase the illegal trade and loss budget. The Ministry of Finance agree that establishing a single minimum price for all brands of cigarettes aimed at reducing the availability of tobacco products, the newspaper said.

Tobacco manufacturers have proposed to introduce a minimum price on cigarettes© RIA Novosti, Integratiebeleid in fotobanka happens if you quit Smoking