Fiscal potential of tobacco market

Abstract

The illegal tobacco market is a widespread problem and therefore requires balanced global solutions. It is essential to propose measures to reduce the level of illegal tobacco products circulation to boost the fiscal potential of the excise tax. The purpose of the article is to identify the features of the development of the tobacco market, to assess the level of its shadow component and to substantiate the measures aimed at reducing this indicator, which will contribute to the strengthening of the fiscal effectiveness of the excise tax. The study hypothesis is that the increase in excise tax rates on tobacco products without proper tax control and the formation of an appropriate institutional environment of fiscal policy leads to the growth of illegal trade in tobacco products and irreversible budget losses. The author used a systematic approach in the preparation of this study. Methods of analysis and synthesis were also used; in addition – comparison; dialectical, generalization and systematization methods. The study determined the impact of a full-scale invasion of the aggressor on the tobacco industry. Changes in the volume and structure of tobacco product consumption have been determined, and certain peculiarities of market development have been highlighted. According to the data of an international study, the level of illegal tobacco products circulation in Ukraine was characte­rized, and a comparison of this indicator with the corresponding indicators of the EU countries and Great Britain was carried out. An analysis of the dynamics of the indicator of the shadow segment of the tobacco market in Ukraine and irreversible budget losses from the existence of this phenomenon for the years 2014–2023 was carried out. The main reasons for the growth of illegal tobacco products circulation have been established, including the constant increase in excise duty rates and the insufficient level of effectiveness of the state control system over the production and circulation of tobacco products. Measures for counteracting the shadow tobacco market are proposed, which will contribute to expanding the fiscal potential. In particular, this concerns the formation of a complete system of state control over the production and circulation of tobacco pro­ducts, a balanced and consistent tax policy, improvement of the coordination of law enfor­cement and fiscal authorities, the level of their institutional support and the concentration of the activities of the mentioned authorities on the supply of raw materials to produce counter­feit goods, as well as combating smuggling.