Ukraine raises excise duties on cigarettes again

MOSCOW. Dec 4 (Interfax) - Ukraine has revised the schedule for a phased increase in excise tax on cigarettes, converting the rates from UAH to euros and raising the final target to 90 euros per 1,000 cigarettes in 2028, which corresponds to the minimum excise tax level in the European Union.

The Verkhovna Rada passed the relevant bill on Wednesday, Ukrainian media reported.

The document also implies differentiation of the tax on heated tobacco products, as while in 2025. The excise will be lower than the one on cigarettes by 10%, or 70.4 euros against 78 euros in 2025. It will reach 20%, or 72 euros against 90 euros, in 2028.

Given the current excise level of UAH 2,516.54, or 57.4 euros, the rise in the excise on cigarettes will be 35.8% in 2025. Market participants estimate that the increase in the retail price of a pack of cigarettes will be around UAH 40, or up to 50%.

According to the Finance Ministry's estimates described in the draft Budget Declaration, the adoption of the law will increase state budget revenues by UAH 0.6 billion in 2025, by UAH 5 billion in 2026, by UAH 9.4 billion in 2027, and by UAH 13.9 billion in 2028.

"The excises on tobacco were reviewed in order to harmonize Ukrainian legislation with the EU requirements and is one of the fiscal measures under the International Monetary Fund's Extended Funding Facility to ensure financial stability, contain risks and achieve the goals of EU accession," the media quoted the Finance Ministry as saying in a statement.

Ukraine has set a target to raise the excises on tobacco products by 20% annually since 2018, which was supposed to meet the requirements of the EU directive for the minimum excise liability at 90 euros in 2025, but due to devaluation in 2025, the excise on cigarettes in line with this target would have reached only 70 euros, which necessitated a review of excise tax rates, the statement said.

The excise tax on cigarettes will be 82 euros in 2026, 86 euros in 2027, for heated tobacco products, 70.8 euros and 71.14 euros, respectively, it said.

The law will take effect on January 1, 2025.