The government accommodates requests from the tobacco industry for a longer time frame for implementation or postponement of tobacco control law. (e.g. 180 days is common for PHW, Tax increase can be implemented within 1 month) (Rec 7.1)

In 2017-2018 the tobacco industry front groups have been focusing on delaying adoption of tobacco control draft laws 2820 and 4030a. As of April 2019, both draft laws are not yet adopted. These draft laws comply with the WHO FCTC and supported by the WHO, MoH[1].

Association of Ukrainian Cities[2] and National Organization of Retail Trade[3] sent letters to the Government asking not to support tobacco control draft law 4030a and several media statements criticizing the draft law[4].

In 2018 the Ministry of Finance proposed additional 9% (in line with inflation) increase of specific excise rates for tobacco products (20% increase from January 2019 was already adopted by the parliament) effective from January 2019. However, as a compromise to the industry requests the 9% excise increase was postponed till July 2019[5].

The government gives privileges, incentives, exemptions or benefits to the tobacco industry (Rec 7.3)

According to Article 10 of the Law of Ukraine “On Measures of Prevention and Reduction of Use of Tobacco Products and Their Harmful Influence on People’s Health,” it is prohibited to support manufacturing (import) of tobacco and tobacco products for sales in the customs area of Ukraine in the form of public financing, provision of financial aid, financial guarantees, grants, subsidies, subsidized loans from the funds of the National Budget of Ukraine and local budgets to respective economic entities[6].

Philip Morris Ukraine in March 2015 appealed and received permission from Kharkiv customs office to apply the processing mode in the customs territory of Ukraine for the production of cigarettes and accompanying products and their re-export for the period from April 1, 2015 through March 31, 2016. The company was authorized to conditional exemption from Ukrainian import duties and other import taxes on materials for processing under the terms of re-export.

After Philip Morris Ukraine carried out processing and re-export operations, the main directorate of the State Fiscal Service in Kharkiv region conducted an unscheduled inspection of the company’s compliance with the customs legislation of Ukraine regarding the clearance of goods in the processing mode in the customs territory of Ukraine.

According to the results of the inspection of the main directorate of the State Fiscal Service in Kharkiv region, on June 14, 2016, it approved decision notices that determined the liabilities for paying of import duties, additional import duty and VAT on the import of materials, as well as penalties for the total amount UAH 635.3 million Philip Morris Ukraine. Philip Morris Ukraine said that the actions of the State Fiscal Service are pressure on the company. After that, the parties entered into litigation.

On December 5, 2018, the Cabinet of Ministers of Ukraine approved a draft amicable agreement between Philip Morris and Ukraine, foreseeing the abolishment of the tax notification for the amount of UAH 635.3 million by the State Fiscal Service of Ukraine[7].

International travelers are allowed to bring into Kiev duty free 200 cigarettes or 50 cigars or 250 grams of tobacco products.

[1] New laws to reduce access to tobacco products for youth in Ukraine. WHO Europe. April 14 2019.

[2] Letter from the Ministry of Development and Trade about potential budget loses due to adoption of draft law 4030a. April 14 2019.

[3] More than 7 thousand trade enterprises can close because the bill 4030a. News finance. April 14 2019.

[4] Association of Ukrainian Cities held a working meeting with representatives of the tobacco industry on issues of taxation of tobacco products and payment of corresponding revenues to local budgets. Association of Ukrainian Cities. April 14 2019.

[5] Excise excitation: how the Cabinet intervened in the redistribution of the tobacco market. RBC. April 20 2019.

[6] Law of Ukraine on Measures of Prevention and Reduction of Use of Tobacco Products and Their Harmful Influence on People’s Health. April 8 2019.

[7] Philip Morris Ukraine calls on fiscal service to withdraw tax notifications for over UAH 635 mln under amicable agreement. Interfax. April 14 2019.