According to TASS news agency reported on August 11, the Russian Ministry of Finance proposed a proposal to determine the minimum price of nicotine products in circulation, sales (excluding exports to Russia and regions outside the Eurasian Economic Union). The draft government resolution on this scheme was drafted by the Ministry of Finance and published on the legal portal.
The explanation notes that this proposed approach has already been used by the Department of Agriculture in setting minimum prices for cigarette products.
Meanwhile, nicotine-free e-cigarette liquids and hookah tobacco blends are currently exempt from tobacco taxes.
Therefore, in the formula to determine the minimum price of these products, similar sub-product tax goods are used, namely the tax rate of e-cigarette vaping and hookah tobacco.
Steps in the proposal include calculating minimum prices for heated tobacco products, e-cigarette liquids (nicotine liquids, nicotine-free liquids), and tobacco-free water pipe tobacco blends. The formula form of the draft is summarized into a general form, which is calculated as follows:
Minimum price = tax rate per unit mass or volume × (1 + VAT rate) × increase factor;
In the given formula, the increase factor reflects the cost of production or imported products, as well as logistics and infrastructure maintenance expenses;
In calculating these coefficients, data on the costs and purchase prices of manufacturers and importers of the relevant types of products are also used.
The document states:
“The increase factor in this formula reflects the cost of producing the product or purchasing it by the importer, as well as the cost of logistics and infrastructure maintenance. In calculating these coefficients, cost and purchase price data for manufacturers and importers of the relevant types of products are also used.”
Fixing a minimum price would affect the illicit segment of the nicotine product market. However, it is important to note that wholesale and retail sellers are already selling nicotine products at prices higher than the minimum price when they are operating honestly. Accordingly, those businesses would not be affected by the adoption of the draft resolution.
References:
【1】Минфин разработал порядок определения минимальной цены на никотинсодержащую продукцию