Harmonization of excise tax on tobacco products

The article deals with the experience of post-socialist EU countries, in particular, Bulgaria, as to the accomplishment of minimal requirements to the level of excise taxation of cigarettes within the general process of tax harmonization. The authors consider consequences of this policy in the context of its impact on the cigarette market, achievement of health goals and provision of the planned level of budget revenues. Analyzed the contradictions harmonization of the excise tax on cigarettes in EU, which take the form of the change of its target reference points, i.e. complementing the indicator of minimum level of the overall excise rate on cigarettes with minimal requirements to the size of excise yield, which is recognized as the most effective mechanism for reducing price differentiation among EU countries. The authors define features of the excise policy in Ukraine, which is characterized by high rates of increase of the specific excise and a minimum excise duty on cigarettes. There are arguments in favor of the assumption that this trend did not lead to price shock only because the cigarette manufacturers, competing for the market, tried to keep low prices for their products. It is concluded that, in Ukraine, the continuation of the aggressive policy of raising excise rates for cigarettes, especially in a combination with the establishment by the Cabinet of Ministers of Ukraine of minimum wholesale and retail prices for them, sooner or later can lead to a price increase and, on this basis, to the expansion of the shadow cigarette market. The authors justify the necessity of compliance by the Ukrainian government of such principles of efficient excise policy as gradual increase of excise tax rates, development and implementation of a stage-by-stage plan of harmonization of the tax burden on tobacco products, considering, in the process at setting tax rates on cigarettes, such factors as the risk of smuggling, purchasing power of local consumers, tax rates in neighboring countries, and the ability and effectiveness of the tax authority to enforce compliance with the tax legislation. The article was prepared within the research project on "Improving the tax system with the decentralization of state power" (No of state registration 0115U000938).