A tobacco tax success story in the Russian Federation
In 2009, smoking prevalence in the Russian Federation stood at 39.1% (43.9 million adults), despite the fact that 90.8% of adults believed that smoking causes serious illness. Strong action was clearly needed to change smoking behaviour in the country. In 2010, the Russian Government introduced the National strategy on creation of a public policy to combat tobacco consumption for the period of 2010–2015.
This was followed by the adoption of national anti-tobacco legislation in 2013. Federal Law No. 15-FZ on protecting the health of citizens from the effects of second-hand tobacco smoke and the consequences of tobacco consumption became one of the most comprehensive laws globally. All of its provisions reflected the spirit of the WHO Framework Convention on Tobacco Control (FCTC), a legally binding treaty ratified by 180 countries. Among other crucial measures, the law underlined price and tax measures aimed at reducing demand for tobacco by increasing tobacco taxes.
Article 6 of the WHO FCTC states, “Each Party should implement tax policies and price policies on tobacco products so as to contribute to the health objectives aimed at reducing tobacco consumption. … Tax rates should be increased annually, taking into account inflation and income change to make tobacco products less affordable over time.”
In keeping with this recommendation, the Russian Federation has consistently raised tobacco taxes since 2010, annually increasing the average excise burden by at least 30%. The Russian Federation uses a mixed excise tax system that includes both a specific tax component and an ad valorem tax component (a tax in proportion to the estimated value of the goods) with a minimum specific tax floor. The consistent increase in taxes, alongside other tobacco control measures from the country’s comprehensive tobacco law, greatly reduced tobacco sales and tobacco consumption in the country, boosted tobacco excise revenue and resulted in a number of other significant benefits.
Impact of tobacco taxation 2009–2016
The average excise tax increase in the Russian Federation was 9-fold over 7 years. This increase helped deliver the following results.
- The average nominal price of a pack of 20 domestic-brand filter cigarettes increased from 14.5 roubles in December 2009 to 75 roubles in December 2016. Real disposable per capita income increased by 12.6% from 2010 to 2016. Real cigarette prices increased by 150% over those 7 years, making cigarettes much less affordable.
- Sales decreased from 385 billion cigarettes in 2009 to 281 billion cigarettes in 2016 – a decrease of 104 billion cigarettes, or 27%.
- Tobacco excise revenue increased from 80 billion roubles in 2009 to 483 billion roubles in 2016, or 6-fold in nominal terms. In real (inflation-adjusted) terms, the revenue increased 3.5-fold in 7 years.
- According to KPMG reports (commissioned by the tobacco industry), cigarette smuggling out of Russia to European Union countries decreased from 6.9 billion cigarettes in 2009 to 1 billion cigarettes in 2015.
- According to the Global Adult Tobacco Survey, tobacco use prevalence significantly decreased among Russian adults, falling from 39.4% in 2009 to 30.9% in 2016 (from 60.7% to 50.9% among males; from 21.7% to 14.3% among females). This represents a 21.5% relative decline in tobacco use prevalence for the period under review.
Tobacco taxation supports sustainable development
Sustainable Development Goal (SDG) 3.A specifically commits countries to strengthening the implementation of the WHO FCTC within the overarching framework of the 2030 Agenda for Sustainable Development. The inclusion of tobacco control and implementation of the WHO FCTC as a key SDG target recognizes the magnitude of the smoking epidemic. It also indicates that all countries should prioritize tobacco control and commit to implementing strong tobacco control measures.
Increases in tobacco taxes are known to reduce tobacco consumption faster than any other single measure. WHO estimates that if all countries increased the amount of excise tax charged on cigarette packs by 50%, there would be 49 million fewer smokers and at least 11 million tobacco-related deaths averted. Tobacco taxation is crucial to achieving SDG target 3.4: a one-third reduction globally, by 2030, of premature deaths from noncommunicable diseases.