Ukraine: Parliament raises tobacco taxes, but ignores heated tobacco

The Ukrainian parliament has voted for a continuous increase in taxes on tobacco products until 2028, continuing a consistent tax policy for several years. However, following lobbying by manufacturers, heated tobacco products will benefit from preferential taxation, leading to a risk of consumption shift that is worrying for public health[1].

A 67% increase in the price of the package by 2028

By 237 votes out of 450, the Rada approved the bill to increase excise duties on tobacco products. From 2025 to 1^er January 2028, taxes will gradually increase, leading to an increase in the retail price of the package by about 40 hryvnias, or just over 90 euro cents. Since the retail price of the best-selling package is currently 1.36 euros, this tax policy is expected to result in an increase in the price of 67% by 2028. For more than ten years, Ukraine has implemented a set of measures to significantly reduce tobacco consumption among the population and to meet European standards. Having ratified the WHO Framework Convention on Tobacco Control (FCTC) in 2016, the Ukrainian government has since implemented a consistent policy of continuously increasing tobacco taxes. Such a trajectory has been particularly beneficial for the country: the price of a packet of tobacco has increased 27-fold in ten years, tax revenues have increased by 13,00% and the number of smokers has been reduced by 40%. Since 2017, this policy has been renewed, with an annual increase of 20%.

Preferential tax treatment for heated tobacco

However, as the NGO Tobacco Free-Kids points out, the bill provides for advantageous taxation for heated tobacco products even though these are mainly consumed by young people, and despite the increased effectiveness of tax policies on younger generations, who are more sensitive to price variations.[2]. Thus, as provided for in the legislation adopted by Parliament, the taxation of heated tobacco will be 20% lower than that of cigarettes. This decision, following strong lobbying by the tobacco industry, is contrary to good practices in tobacco taxation, which recommend in particular applying significant tax increases to all tobacco products, in order to reduce the price gaps between the different products and avoid consumption transfers. According to the Vienna Institute for Economic Studies, this preferential treatment will result in a tax shortfall of almost 70 million euros for Ukrainian public accounts by 2028. Finally, the Rada's decision contrasts with the proactive policies pursued so far in Ukraine on the taxation of heated tobacco. The country was in fact one of the first to implement a dissuasive tax policy on these products, based on taxation of each product, as almost all those involved in the fight against smoking recommend.

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[1] Babel, The Verkhovna Rada generally supported the increase in the excise tax on tobacco, 04/12/2024, (accessed 06/12/2024)

[2] Tobacco Free Kids, Ukraine to Raise Taxes on Cigarettes, but Caves to Industry Demands on Heated Tobacco Products, 04/12/2024, (accessed 06/12/2024)

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