Marking will help fight illegal tobacco discussed in Chelyabinsk

#industry news

Despite the increasing measures of struggle, the problem of illegal tobacco trafficking is still acute in the Chelyabinsk region.

On December 7, the South Ural Chamber of Commerce and Industry held a discussion of the problem. The round table brought together representatives of federal authorities, market participants, specialized heads of supervisory agencies and regional authorities. During the two-hour conversation, the strengths and weaknesses of illegal trafficking control mechanisms, growth risks, as well as new counteraction measures were analyzed.

Demand creates violations

"In the third quarter of 2022, the share of illegal tobacco turnover in the Chelyabinsk region was 17.4%, which is higher than the average in Russia. In the same period of 2021, this figure was slightly more – 17.8%. There is a positive trend, but our indicators are still worse than the average Russian ones," said Natalia Osipova, Vice President of the South Ural Chamber of Commerce and Industry.

"Oddly enough, the illegal turnover of tobacco products is highest in villages, and not in district centers," stated the first deputy director of the ANO "NCCR" Baysolt Khamzatov. – There are more points of illegal sales, the work of social activists has sunk in parallel. But there is a dynamic in the volume of confiscated tobacco products, it pleases."

The main problem, according to experts, is the illegal import of cigarettes from EU member states. 92% of the share of illegal tobacco products sold in Russia illegally are packs with the Belarusian excise stamp. 5.7% is imported from Armenia, 1.9% — from Kazakhstan, 0.9% — from Kyrgyzstan.

"Tobacco is an excisable commodity, it is profitable and interesting to work with the illegal turnover of excisable goods, because in fact you assign yourself most of the excise tax, and you give an imaginary discount to the consumer for the rest," Vladlen Maksimov, president of the Association of Small-format Trade, shared his opinion. – This is the case when a legal product cannot compete with an illegal one. Success in the fight against illegal trafficking largely depends on entrepreneurs and consumers. After all, people themselves provoke the seller to work with illegal goods. The consumer demand for obviously illegal products is largely conscious. That's why these merchants arise from the boxes, small points that discredit the entire small retail. I would like to note that it is easier for the inspection authorities to check legal retail and it is much more difficult to punish those who conduct completely illegal economic activities."

Igor Cherkassky, Head of Combating Illicit Trafficking in Tobacco Products at BAT Russia LLC, shared his international experience. Significant volumes of illegal turnover of tobacco products are observed in many countries of the world:

"Such growth is provoked by excessively aggressive measures aimed at combating smoking. These measures, as a rule, do not take into account the reaction of smokers. It is believed that by increasing excise taxes and the single minimum price of a pack, the state thereby forces the consumer to quit smoking. However, this only contributes to the development of illegal trafficking: those who cannot quit smoking go and buy contraband and counterfeit cigarettes, which are two to three times cheaper than legal ones," he said.

Marking is just the beginning

About 900 thousand companies in the country operate under the marking system, these are manufacturers and sellers of ten categories of goods – water, milk, fur coats, medicines, as well as cigarettes. The number of users of the application "Chestny Znak" is about 8 million people across Russia. Due to the marking, sellers and buyers can check the expiration date and legality of a particular product.

"After the introduction of the tobacco product marking system in 2019, about 18 legal enterprises in the industry were identified, many had to be legalized in order to continue working, more than 30 enterprises were closed," said Maxim Kurgansky, Director of protection against illegal turnover of products of the CDAT. – Marking helps to identify exactly those who commit violations. Due to this approach, in the future, control and supervisory authorities focus inspections on such objects. The volumes of confiscated illegal products are really growing in the Chelyabinsk region. It is important to consolidate the results and not slow down! The pandemic and all kinds of restrictions have reduced the flow of products between regions and from neighboring countries, it is impossible to allow those illegal supply channels that worked before to recover."

This year, on behalf of the Prime Minister of the Russian Federation Mikhail Mishustin, a number of draft laws regulating the fight against illegal tobacco trafficking were developed. Very soon they will be considered in the State Duma and, possibly, at the beginning of 2023, they will come into force.

"Business itself asked the state to establish a single regulator, because there is no one in this industry," said Georgy Golovanov, a member of the State Duma Expert Council on state Regulation of relations in the production and turnover of tobacco and innovative nicotine-containing products. – It has been proposed to introduce licensing - something that has not been done in this area so far. That is, there will be new payments to the budget in the form of a state duty for issuing licenses. Licensing will differentiate between a bona fide business and an illegal one. For the first time in the industry, it is planned to introduce control over the turnover of technological equipment. It will be registered and checked how it works. Unused equipment will be preserved, and those used for illegal production will be destroyed. This should make it more difficult to produce illegal products inside the country."

The use of a digital marking system for state control of goods, additional restrictions on the movement of unmarked tobacco products and nicotine–containing products, a ban on retail sales without consumer packaging - all this will help to curb the turnover of illegal products.

The moratorium is a stumbling block

Since the beginning of 2018, more than 11.8 million packs of illegal cigarettes have been seized in the Chelyabinsk region. In the Sverdlovsk region, this volume is three times less, in the Orenburg region – twice. In 2022, the South Ural police seized more than 600 thousand packs of unmarked cigarettes from sellers. This is 20% more than last year. Raids take place mainly in large cities – Chelyabinsk, Magnitogorsk. This year, large quantities of illegal products were seized from entrepreneurs in Verkhneuralsk and Yemanzhelinsk.

"Basically, such cigarettes are in transit from Belarus, and they are carried by well-known logistics companies," said Ivan Vatolin, acting head of the Administration for Economic Security and Combating the Corruption of the MIA of Russia GA in the Chelyabinsk region. – One truck is 500 thousand packs. For the carrier, this is a profit of at least 60 thousand rubles. Therefore, I think that it is necessary to work with logistics companies and entrepreneurs. Some kiosks have 5-6 administrative protocols, but they continue to violate them. The explanation is simple: the fine for the sale of illegal tobacco is 3.5 thousand rubles, and the profit from turnover is about 35 thousand."

The Chelyabinsk administration, customs, the regional Department of Rospotrebnadzor and the tax inspectorate are actively involved in the work. Representatives of supervisory agencies declare with one voice: the moratorium on scheduled and unscheduled inspections prevents work.

"Since March 2022, supervisory authorities have been restricted in conducting inspections of legal entities and individual entrepreneurs by Decree of the Government of the Russian Federation No. 336. Due to the moratorium, the number of protocols, fines, criminal cases for the production and sale of illegal tobacco products has sharply decreased," said Anastasia Belenkova, Corporate Affairs Manager of the Philip Morris International Company in Russia. – The validity of this Decree has been extended for 2023. But now it will not apply to unscheduled inspections on consumer applications. The total volume of illegal cigarettes sold in Russia in 2020 is 27 billion packs. In 2020, the country received less than 100 billion rubles from excise taxes and VAT to the budget, in 2021 – almost 140 billion rubles. For this reason, it is important to exclude the production and sale of tobacco and nicotine-containing products from the moratorium in order to prevent further growth of illegal trafficking."

Another serious consequence of illegal trafficking is that the shadow business violates all restrictions and provides free access to tobacco products for minors. When they work outside the law, they do not ask the buyer for a passport. "Illegal packs are sold cheaper, and teenagers are a price-sensitive audience," stated Svetlana Chernyshova, chairman of the IPO "Public Council on the Problem of Teenage Smoking". - We have prepared methodological manuals and training courses for trade workers explaining exactly how to refuse to sell cigarettes to minors. We have created videos to demonstrate them on monitors in public transport. It is vital to form an intolerant position in society towards the facts of tobacco sales to children and adolescents!"

Close the paths to illegals

"Legal products are being pushed out of the market, not only legal retail is suffering, but risks are also being created for consumers," said Roman Troshkin, Manager for work with government authorities at JTI Russia. – The main reason for the development of illegal turnover is the huge difference in the rates of excise taxes of the EAEU countries. Therefore, first of all, it is necessary to harmonize excise tax rates in the countries of the Union. In December 2019, all the EAEU member states signed an Agreement on the principles of conducting tax policy in the field of excise taxes on tobacco products. This document provides for the introduction of a single indicative rate (35 euros per 1 thousand cigarettes) and a corridor of deviations of actual excise rates at the level of plus or minus 20%. It will be good if all countries comply with the terms of this agreement, and after 2024 they will abolish the range of deviation from the indicative rate — up to the complete unification of excise rates on tobacco products in all EAEU countries."

The discussion and exchange of views showed that the state and business have similar views on the problem of illegal cigarettes and are ready to jointly confront it. It is not the first time that the South Ural CHAMBER OF COMMERCE and INDUSTRY raises the problem of the shadow market of tobacco and nicotine-containing products, helps to unite the efforts of all levels of government, business and healthy social forces. A number of proposals made during the round table will be developed within the framework of the activities of the SUCCI in 2023. The participants of the discussion agreed to meet again in a year to summarize the results of the next round of the fight against the shadow sector in the sphere of tobacco and nicotine–containing products.