Ref. Ares(2017)1553728 - 22/03/2017
Ref. Ares(2020)7745074 - 18/12/2020
How to tackle the illicit inflows
of cigarettes from Belarus
How Belarus excise system costs the EU
€1 Bn a year.
53bn illicit cigarettes consumed in the EU cost
€11.3bn in 2015 in lost tax revenues
• France and Poland
recorded the highest
volumes of illegal cigarettes
• 88% of illegal cigarettes
were coming from non-EU
contraband & counterfeit
• A third of illicit cigarettes
were illicit whites*
representing 18.8bn
cigarettes
*Cigarettes that are usually manufactured
legally in one country/market but which
the evidence suggests have been smuggled
across borders during their transit to the
destination market under review where
they have limited or no legal distribution
and are sold without payment of tax.
Data: KPMG Project Sun 2015 results
Approximately 5.3 billion illicit white cigarettes were smuggled into
the EU from Belarus in 2015…
Destination for Illicit Whites from Belarus
(in billion cigarettes)
Other EU, 0.33
Hungary, 0.14
Latvia, 0.36
Lithuania, 0.5
Poland, 2.44
Germany, 0.43
Italy, 0.51
UK, 0.54
…resulting in an estimated ca. 1 billion EURO loss in tax revenue for
EU member states.
Source: EPS studies in EU (all 2015) and Excise tables as of 1 January 2016, EU, DG TAXUD
Belarus has 3-tier specific excise structure
Low priced cigarettes receive a favorable tax treatment
Retail prices per pack, BYN
3.00
2.50
um
remi
P
2.00
WAP*
2.49
1,78
1.50
WAP*
FM
V
1.66
1,23
VAT
1.00
0.41
VAT
0.28
WAP*
0.93
Low
0.50
Excise
VAT
Excise
0.85
0.16
0.75
Excise
0.31
-
Low
VFM
Premium
* Weighted average retail price in segments (Nielsen Survey Belarus, Dec 2016).
Excise rates are actual as Dec, 2016
Low priced cigarettes excise contribution has been declining
Low priced cigarettes excise rate has not kept up with inflation
Excise rates BYN per 1000 cigarettes by excise segment
47.32
+12%
Premium
42.25
VFM
+10,5%
41.27
32.50
37.35
Excise rates increase 2013 was the condition of
25.00
the fifth tranche of the ACF* financial credit.
26.88
18.06
21.50
Low
+7%
16.37
10.32
16.06
14.38
15.30
12.50
10.04
8.32
2.88
2010
2011
2012
2013
2014
2015
2016
2017
Premium/Low ratio
28%
55%
50%
44%
36%
35%
•
Premium/VFM excise growth in line with cumulative CPI, Low excise protected by
Government and grew significantly below CPI
•
Multinational companies are not allowed to sell low priced cigarettes since 2015
* ACF – Anticrisis Fund has been renamed Eurasian Fund for Stabilization and Development
Source: website of EFSD (http://efsd.eabr.org/e/)
Belarus Excise Tax Reform:
An opportunity to generate additional revenue AND address structural
issues
Current Structure
Proposed reform
Suboptimal Revenue
Increases government
Generation
revenues
Discriminatory
Mitigates effects of
discrimination
Inconsistent with
Aligns more closely with
neighboring markets
neighbors
Enables illicit trade
Reduces incentives for illicit
trade