Tobacco leaves, nicotine remains

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Tobacco companies seem to have been able to defend vaping from a complete ban.
In any case, as Sergey Katasonov, head of the expert council for the development of competition in the markets of nicotine-containing products of the State Duma of the Russian Federation, said at the first Eurasian Nicotine Forum held on June 21 in Nur-Sultan, the law on a complete ban on the sale of nicotine-containing liquid and devices for its delivery, which was submitted to the government of the Russian Federation by the Ministry of Health, was rejected.
The transfer of regulation from the Ministry of Agriculture to the Ministry of Finance inspires even more hopes for the tobacco industry. The latter has already submitted to the Government a bill on regulating the production and turnover of tobacco products and raw materials by analogy with the regulation of the alcohol market — in order to ensure the safety of tobacco products for citizens, as well as "protect the economic interests of the country."
The tobacco industry hopes that as soon as a single technical regulation for nicotine-containing products is developed within the framework of the EAEU, they will be able to legalize nicotine packs in Russia, thereby protecting their consumers, and at the same time filling the budget.
Tobacco manufacturers and the Expert Council of the State Duma supporting them have several arguments at once. The first one that provided them with the support of the Ministry of Finance and the Ministry of Economic Development is financial. Tobacco excise taxes account for about 3% of federal budget revenues and more than half of all excise taxes received (710 billion rubles by the end of 2021). The tobacco industry is especially pleasant because excise taxes on tobacco, as well as on alcohol, can be increased almost without restrictions. After all, ideally, citizens should completely stop smoking and drinking, and high excise taxes only help them in this. So, in 2016-2021, the excise tax rate on cigarettes almost doubled, and this allowed to keep the fees to the budget, although the volume of tobacco sales over these 5 years fell by 1.4 times. The Accounting Chamber states: The Ministry of Finance, by raising excise taxes, does not provide any calculations and expected estimates of the budget effect, nor indicators of how much tobacco consumption should decrease due to the next increase.
But the income could be even greater if all nicotine-containing products, which are now banned in Russia, but still exist on the market, would be legalized and taxed. And the second condition is if it would be possible to equalize excise taxes in Russia and other EAEU countries and thus stop counterfeiting.

Grey smoke

This is confirmed by the figures of the Accounting Chamber. The agency is guided by the assessment of the independent international agency Kantar TNS Russia: the share of illegal tobacco products (we are talking only about the usual cigarettes and electronic cigarettes) in the Russian Federation increased from 2016 to 2021 from 1.1% to 10.7%. Because of this, the federal budget, as noted in the Accounting Chamber, was not counted in the amount of almost 300 billion rubles, including 246.3 billion rubles of excise taxes and almost 50 billion rubles of VAT.
As the Expert magazine has already written (see the article "Kings of the Illegal Market", No. 20, 2021), counterfeit goods enter Russia from neighboring countries, where excise tax rates are almost twice lower than Russian ones. So, in 2021, the excise tax rates for cigarettes in Russia amounted to 35.87 euros per 1 thousand pieces, while in Belarus, Kyrgyzstan, Armenia and Kazakhstan these rates ranged from 16 to 23 euros per 1 thousand cigarettes.
Since September last year, when transporting tobacco products exported from the EAEU member states, the customs transit procedure has become mandatory, but this did not help much. The Internet and social networks are full of offers to buy cigarettes from Belarus, Kazakhstan, the Kyrgyz Republic, the UAE at a price of 23 rubles per pack.
It is clear that only an increase in excise taxes by other EAEU members could radically solve the issue. It seems that this should happen in 2024. From this moment, the EAEU member states should switch to an excise tax rate equivalent to 35 euros per 1 thousand pieces, which may deviate from the indicative rate by no more than 20% in a smaller or larger direction. But in order to "catch up" with the Russian Federation, the rest of the EEU members will have to raise excise taxes by 1.3-1.6 times by 2024. It is unclear whether they will decide on such an increase.
It is interesting that even marking does not save from counterfeit. In the same report, the Accounting Chamber states: the number of marking codes with the status "code out of circulation" in 2020 amounted to 50.5% of the issued codes, and in the first quarter of 2021 it increased to 61.5%. This means that a significant number of turnover participants do not submit information to the information system for marking goods.

Burns no longer

Unlike cigarettes, which are at least legal, snus has been banned in the Russian Federation in recent years. And in 2021, chewing tobacco was also banned. "If we cannot ban smoking, then it is illogical to ban chewing tobacco, which does not cause more harm than cigarettes," argues Sergey Katasonov. On the contrary, innovative nicotine-containing products should legally enter the market and replace traditional cigarettes, the head of the expert council of the State Duma is sure.
Recall that sucking tobacco, also known as snus, has been banned in Russia since 2015. Nicotine packs are chewing mixes, plates and lollipops, which in fact often do not contain tobacco, but which contain a high concentration of nicotine. They were banned in Russia last year. They are also banned in Kazakhstan, but not in Belarus. From here, as well as from other countries, packs freely enter the Russian Federation and are sold on the illegal market. At the same time, according to the deputy director for Research and Innovation of the All-Russian Research Institute of Tobacco and Tobacco Products Evgeniya Gnuchikh, when samples of peks were studied at ARSRITTP, it turned out that some of them had "staggering nicotine content". "The state has decided that it is easier to ban than to regulate <nicotine-containing packs>,— says Gnuchikh. "But they continue to be present on the market – illegally and are not controlled in any way."
In general, nicotine-containing packs are as far away from traditional cigarettes as possible in terms of the amount of harm to health, since the main problems are caused by resins and other gorenje products. Heating systems are less harmful than cigarettes, and packs and snus are less harmful than heating systems. But provided that the nicotine content in them does not exceed the nicotine content in ordinary cigarettes. "Governments should separate new products from cigarettes, as they have a different risk profile," says Faruk Ener, CEO of BAT in the sub—region of Russia, Turkey, Caucasus, Central Asia, and Belarus. He suggests to look at the experience of Japan and Britain, where smoking of traditional cigarettes is falling as they switch to alternatives.
However, the Ministry of Health also has serious arguments. Increasingly stringent bans — first snus, then packs, now the attack on vapes and "e-cigarettes" is accompanied by a really noticeable decrease in tobacco use. From 2016 to 2020, the volume of sales of cigarettes and cigarettes decreased from 266.7 billion to 193.2 billion (by 27.6%). And this is accompanied by a decrease in the number of Russians who smoke: in 2020-2021, there were 3.63 million fewer of them. If in 2020 23.3% of Russian citizens smoked, now 20.3%. And in the age group of 15-34, there were fewer smokers per million.