Russia’s Finance Ministry sets minimum prices for nicotine-containing goods

The Russian Ministry of Finance has proposed a plan for determining minimum prices for nicotine products in circulation and sale (excluding exports to Russia and regions outside the Eurasian Economic Union), TASS reported on 11 August. The Ministry of Finance drew up a draft governmental resolution on the program and published it on the legal portal.

In the note, it is noted that this proposed methodology has been applied to the Ministry of Agriculture for setting minimum prices for cigarette products.

At the same time, there is currently no tobacco tax on e-cigarette oils and water tobacco blends that do not contain nicotine.

Therefore, in the formula for determining the minimum price of these products, a tax rate similar to the sub-product tax on goods, i.e., e-cigarette oils and hookahs, is used.

The report notes that the steps in the proposal include calculating minimum prices for heated tobacco products, e-cigarette oils (nicotine oils, nicotine-free oils), and waterpipe mixtures that do not contain tobacco. The draft formula is summarized in a generic form which is calculated as follows.

> Minimum price = tax rate per unit of mass or volume x (1 + VAT rate) x increase factor;
> The increase index reflects the cost of production or the cost of imported goods in the given formula, as well as the cost of logistics and maintenance of infrastructure;
> Cost and purchase price data from manufacturers and importers of the product in question are also used in the calculation of these coefficients.

The document states:

“The coefficients of increase in the formula reflect the cost of production of the product or the cost of procurement by the importer, as well as the cost of logistics and maintenance of infrastructure. Cost and purchase price data from manufacturers and importers of the product in question are also used in the calculation of these factors.”

Determining minimum prices affects the illicit segment of the market for nicotine products. However, it is worth noting that wholesalers and retailers, operating in good faith, already sell nicotine products at prices higher than the minimum price. Therefore, these businesses will not be affected by the adoption of the draft resolution.

 

Reference:

【1】Минфин разработал порядок определения минимальной цены на никотинсодержащую продукцию