Tobacco products market: fiscal and regulatory role of taxation

Abstract

Background. The tobacco taxation policy’s fiscal efficiency should be compre­hensively examined, taking into account both the criteria for the amount of the collected tax revenues to the budget system and the specific share of the hidden tax base, which is part of the shadow economy.
The analysis of recent research and publications has shown that despite the availability of some scientific investigations, it is advisable to further develop the main provisions on the tobacco excise tax collection for Ukraine, taking the current market trends and the potential threats into account.
The aim of this article is to assess the potential development challenges for the domestic tobacco market and to develop both scientific and practical proposals to increase the fiscal and regulatory effectiveness of the excise tax on tobacco and tobacco products.
Materials and methods. In the course of research, the system approach, the methods of analytical estimation, synthesis, economic and mathematical modeling, and scientific abstraction were used.
Results. The directions for the further improvement in the tobacco excise taxation practice were offered, taking into account its fiscal and regulatory aspects. The modern peculiarities of the development of the tobacco products market in Ukraine were determined. The main causes and consequences of the illicit excisable goods’ production and circulation have been studied. The excise tax potential index’s calculations without the implementation of systematic measures in the field of counteracting the illicit market were presented. The government policy’s vectors in the field of reducing the cigarette market’s shadow segment have been identified.
Conclusion. Taking the excisable goods shadow market’s indicators and its expansion potential into account, the balanced adjustments of the state fiscal policy is important. Counteracting the illicit tobacco and tobacco products trafficking is an important element of the national and economic security strategy. It is advisable to systematize the reliable information on the prevalence of smoking, consumer preferences and the relevant products’ consumption intensity in the territorial context, and the illicit market share as well. On the part of the authorized state institutions, the priority measures are modeling the supply and demand for tobacco products; systematization of information on its illegal circulation; description of the modus operandi of the main participants in the shadow market of tobacco and tobacco products; assessment of institutional capacity, transparency and accountability of fiscal and other authorized bodies for counteracting illicit products trafficking.