Cigarette producers will be obliged to obtain licenses

#industry news

Tobacco producers will be obliged to license their activities, a similar requirement will be established for importers and exporters of goods. This was told to Izvestia in the Ministry of Finance, the department has prepared a corresponding bill. All restrictive measures for such products — marking and excise taxes — now concern bona fide manufacturers, the rest easily circumvent the prohibitions. As a result, the share of illegal tobacco is a maximum of 36%, depending on the region. Therefore, the department will fill in the gaps in regulation. Manufacturers supported the initiative of the authorities.

A tough approach

The Ministry of Finance proposed licensing the production of cigarettes, tobacco and nicotine-containing products, as well as the import and export of goods. The Agency has already prepared the relevant bill. The ministry told Izvestia about this. As a model of regulation, the authorities used the already established control system in the alcohol market.

The Ministry of Finance added that, unlike alcohol, retail sales of cigarettes will not yet become a licensed activity. After all, otherwise the norm will respond with an excessive burden on small and medium-sized entrepreneurs, and the costs of the regions for the administration of the new restriction may also jump.

Licensing of the tobacco market will be based on the marking system of the Center for the Development of Advanced Technologies (CDAT, its operator), the Ministry of Finance noted. It will take into account all the information about the volume of production and turnover of products, raw materials. The new rules specified in the draft law will in practice reduce the illegal turnover of such goods and make the market more transparent, the department is confident.

In 2013, the law "On the Protection of citizens' health from the effects of ambient tobacco smoke..." came into force. Deputy Finance Minister Georgy Golovanov previously explained that the document introduced major restrictions in this industry — for example, it is prohibited to sell nicotine products to minors. Over time, mandatory digital marking appeared in the industry, and the authorities also periodically increase excise taxes.

- In practice, all prohibitions and fees apply only to legal products. Illegal - freely sold without excise taxes and marking. The new bill will fill in the gaps in regulation," the official said.

For comparison, the authorities created similar restrictions and a system of state control on the alcohol market about 15 years ago, so now market participants are more strictly observing all the norms, Georgy Golovanov added.

The Ministry of Industry and Trade supported the initiative of the Ministry of Finance, the Ministry of Industry and Trade told Izvestia. The new obligation for manufacturers and wholesalers of tobacco and nicotine-containing products will increase the receipt of excise taxes to the budget, as well as increase the efficiency of work to counteract the illicit trafficking of these goods.

Market support

The maximum share of illegal cigarettes in Russia reaches 36%, such a volume was recorded by experts in Chechnya. The top 5 regions include Rostov and Pskov regions, Mordovia and Dagestan. At least 1% is accounted for by illegal tobacco turnover in the Kamchatka and Khabarovsk Territories, Magadan, Irkutsk and Jewish Autonomous Regions. This is evidenced by the information of the National Scientific Center of Competencies in the field of combating Illicit Trafficking in Industrial Products (NCCR) .We are talking about data for the second half of 2022.

The bill of the Ministry of Finance continues the trend to increase control over the industry, the first step was including marking, noted in the CDAT. With its introduction, the share of illegal tobacco products has been consistently decreasing. According to the NCCR, in 2019 it accounted for an average of 15.6%, and after the introduction of marking in 2020, the indicator decreased by a quarter and by the end of last year amounted to 12%.

- When licensing, the existing marking system will be used, which means there will be no need to introduce new mechanisms. The expenses of companies, according to our expectations, will also not increase, therefore, the prices of products will not jump, — emphasized in the CDAT. Manufacturers positively assessed the new regulation, the tobacco company BAT told Izvestia.

- Licensing will cover the production, import and export of not only finished tobacco and nicotine-containing products, but also raw materials. This will help to track the final destination, complicate the existence of clandestine productions," they added.

In the new law, the authorities also provided for the creation of a federal register of equipment and a mechanism for its seizure and destruction when confiscated from unscrupulous manufacturers, the company said. Now the equipment from underground industries that have been closed may appear in another region after some time. All these measures will contribute to the whitewashing of the market, BAT is confident.

- We do not predict a significant increase in production costs, therefore, the cost of cigarettes after the entry into force of the law, - stressed there.

Despite additional administrative burdens on bona fide market participants, JTI also supported the bill, Izvestia was told there. We are talking about improving the state regulation of the production and turnover of tobacco, nicotine-containing products, as a result, the norms of the document will help to resist the illegal turnover of these goods in Russia.

Izvestia sent a request to the Association of Retail Companies and to the largest retailers - X5 Retail Group, Magnit, Lenta, Okey, Auchan, etc.

"We welcome any measures aimed at whitewashing the market and reducing the volume of illegal products," Oleg Pavlov, head of the Public Consumer Initiative, told Izvestia.

In the conditions of a moratorium on inspections, when the majority of supervisory authorities have their hands tied and the possibilities of influencing violators are limited, the share of illegal products may increase. Therefore, along with licensing, it is necessary to return full control over market participants, as well as expand the powers of supervisory authorities and tighten sanctions, the expert is sure.