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Saturday, March 26, 2011

Tobacco Tax Veto Criticized


Public health advocates accuse Yushchenko of doing cigarettes industry's bidding.

Ukrainian President Victor Yushchenko, citing concern for the tobacco industry and fears of cigarette smuggling, on Nov. 11 vetoed legislation that would have hiked the excise tax on tobacco products by 36 percent.

Public health advocates called a news conference on Nov. 12 to criticize Yushchenko and note that price increases are the most effective way to reduce smoking. Roughly a third of Ukraine's adults smoke, one of the highest rates in the world.

Tobacco-related illnesses prematurely kill some 300 Ukrainians daily, said former Health Minister Mykola Polischuk. "The president's veto contradicts his mottos about European integration," Polishchuk said. "Today all Europe is fighting for air uncontaminated with tobacco smoke."

In 2009, previously approved increases on cigarette excise taxes Ukraine are expected to raise Hr 9 billion for the year, compared to Hr 2.7 billion in 2008.

"With the new law adopted, Ukraine's budget was expected to receive Hr 15 billion in 2010 [from tobacco taxes]," said Oleh Lyashko, a member of parliament with the Bloc of Yulia Tymoshenko. "The president signs the law on increasing social standards [including minimum wages], which requires an additional Hr 70 million next year. Yet he vetoes the law that can bring an extra Hr 6 billion."

Serhiy Gonchar, an anti-tobacco activist from Cherkasy said: "There is no logical explanation to why the president has imposed the veto. Fifty public organizations are united in asking the president to change his position."

The Bloc of Yulia Tymoshenko suspects that Yushchenko is getting support from the tobacco companies. "The president's arguments against the bill are almost identical to those of tobacco companies," Lyashko said. "He was the only person in Ukraine who heard their call."

In contrast to the president's fears that cigarettes will be smuggled into Ukraine if taxes are hiked, the flow of cheap contraband buy cigarettes goes the other way from Ukraine, where cigarettes prices are the lowest in Europe, to other nations. The national customs service reported no cases of imported tobacco contraband in the last year, while 1, 700 cases -- involving 2.1 million packs - of export contraband were registered.

In fact, Ukraine with its cigarette factories pumping out billions of more cheap smokesa year than are smoked domestically is a prime source of cheap online cigarettes smuggled abroad.

Yushchenko's veto is seen as a turnabout in his position of only two years ago, when at a national health conference in Kyiv the president announced support for an anti-tobacco agenda. Higher taxes are the most effective way to curb smoking. "It's the only way to discipline Ukrainians, to make some adults quit and to prevent young kids from ever starting to smoke," Polishchuk said.

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