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Ukraine needs a more balanced approach to the harmonization of excise taxes with the European Union than it is provided by the provisions of the Association Agreement.

This was expressed by Scientific Director of the Growford Institute, Doctor of Economics Tetiana Bogdan at a round table on Tuesday. The event was organized by the Growford Institute and the Gorshenin Institute with the support of the Internet portal

“The Association Agreement with the EU states that the parties seek to harmonize policies in the field of combating illegal production and fraud with excisable goods. Among other things, it is planned to increase excise tax rates on tobacco products. To implement this article, Ukraine has undertaken to implement Directives No. 118 of 2008 and No. 64 of 2011. As a result, the specific rate of excise tax on tobacco products from 2015 to 2022 should increase sixfold. How did this increase in rates affect real revenues to the state budget? From 2015 to 2021, the real rate on tobacco products increased by 118%, while real revenues grew by only 23%. Such differences are caused primarily by the significant shadowing of the tobacco market,” she said.

At the same time, according to her, the Europeans themselves do not consider the Association Agreement as a document that is 100% binding.

“Suffice it to mention the situation with the Nord Stream-2 gas pipeline. This happened at a time when Article 274 of the association’s Agreement between Ukraine and the EU provides an obligation for mutual consideration of the energy networks and capacities of energy infrastructure in the process of integration of energy markets and developing infrastructure development plans. In addition, association agreements do not have a standard single dispute settlement mechanism and their implementation is based largely on the good will of the parties,” said Bogdan.

“This shows that our country needs a more balanced approach to the harmonization of excise taxes and more active counteraction to the illegal production and circulation of tobacco products,” said the Scientific Director of the Growford Institute.