The EBA calls to resolve the excise tax situation

13/ 01/ 2020

Listen to online Stop   In 2015, to fill in local budgets, an excise tax on retail sales was added to the tax list, which is 5% and is paid selling alcoholic beverages, tobacco, and fuel. At the same time, the introduction of this tax has caused a lot of discussions and forecasts about the failure to implement the plan for its collection. Since 2016, a 5% excise tax on retail fuel has been added to the basic rate paid by importers or producers. However, taking into account the situation that tax distribution did not occur automatically, there were up to 3 months of delays in local budget revenues. According to the State Tax Service, in 2019 were completed only 42% of the plans for the collection of excise tax on the sale of tobacco products by economic entities. This means that a large number of unfair entrepreneurs are simply evading the relevant taxes. There may be several explanations for this situation. Firstly, PPO-free sales allow you to sell a bundle of tobacco products without paying a 5% excise tax. Secondly, there are about 55,000 retail outlets in the country today, however, only 300 taxmen authorized to conduct control, which makes it physically impossible to control all outlets. Thirdly, the cost of a retail license allows you to earn much more than the cost of the document itself (the cost of a license to trade tobacco ranges from 250 UAH to 2 000 UAH per year), and in some cases, entrepreneurs even do not issue it. The European Business Association once again highlights the importance of ensuring the equal rule of games on the market. If the issue of this tax won’t be resolved, local budgets will continue to underperform, and the shadow sector will create more inequality. An alternative solution could be reformatting the payment of the tax – putting it in the price for wholesale traders who are big players on the market. In addition, it will also be much easier to exercise control, as more than 100 wholesale licenses have been issued, according to the STS. Christina Linichenko. FMCG Senior Manager in the European Business Association. The tax will be paid based on the maximum retail price and based on PPO data. Selling products to retailers, the tax will already be included in the cost. Previously, only the retailer was setting it at a cost to the consumer, though, in fact, the tax itself might not have been paid. What is important is that there won’t be any influence on the price for a consumer, however, it will serve as one of the tools of gradual shading of the sphere. At the moment, this standard is incorporated into the draft laws N 2501, N 2502 and N 2503, as well as N 1210. Therefore, the business community calls Verkhovna Rada to pay attention to this situation while taking the final decision. 

In 2015, to fill in local budgets, an excise tax on retail sales was added to the tax list, which is 5% and is paid selling alcoholic beverages, tobacco, and fuel. At the same time, the introduction of this tax has caused a lot of discussions and forecasts about the failure to implement the plan for its collection.

Since 2016, a 5% excise tax on retail fuel has been added to the basic rate paid by importers or producers. However, taking into account the situation that tax distribution did not occur automatically, there were up to 3 months of delays in local budget revenues.

According to the State Tax Service, in 2019 were completed only 42% of the plans for the collection of excise tax on the sale of tobacco products by economic entities. This means that a large number of unfair entrepreneurs are simply evading the relevant taxes.

There may be several explanations for this situation.

• Firstly, PPO-free sales allow you to sell a bundle of tobacco products without paying a 5% excise tax.
• Secondly, there are about 55,000 retail outlets in the country today, however, only 300 taxmen authorized to conduct control, which makes it physically impossible to control all outlets.
• Thirdly, the cost of a retail license allows you to earn much more than the cost of the document itself (the cost of a license to trade tobacco ranges from 250 UAH to 2 000 UAH per year), and in some cases, entrepreneurs even do not issue it.

The European Business Association once again highlights the importance of ensuring the equal rule of games on the market. If the issue of this tax won’t be resolved, local budgets will continue to underperform, and the shadow sector will create more inequality.

An alternative solution could be reformatting the payment of the tax – putting it in the price for wholesale traders who are big players on the market. In addition, it will also be much easier to exercise control, as more than 100 wholesale licenses have been issued, according to the STS.

Christina Linichenko FMCG Senior Manager in the European Business Association

The tax will be paid based on the maximum retail price and based on PPO data. Selling products to retailers, the tax will already be included in the cost. Previously, only the retailer was setting it at a cost to the consumer, though, in fact, the tax itself might not have been paid. What is important is that there won’t be any influence on the price for a consumer, however, it will serve as one of the tools of gradual shading of the sphere.

At the moment, this standard is incorporated into the draft laws N 2501, N 2502 and N 2503, as well as N 1210. Therefore, the business community calls Verkhovna Rada to pay attention to this situation while taking the final decision.