Fake and Shoddy E-liquid Takes up 93% in Russia, Causing 61.1B Rubles Fiscal Loss

The Russian National Anti-Illegal Industrial Products Trade Science Center (ANONNCK) has disclosed data. In the first nine months of 2022, illegal tobacco trafficking cost the Russian government 61.1 billion rubles ($8.18 billion). Furthermore, from 2016 to 2021, the Russian Federation Government lost 300 billion rubles ($53.55 billion) in fiscal tax.

According to NNCC data, after dropping sharply from 15.6% to 12% from 2019-2021, illegal cigarettes entering the consumer market remained around 12-13%. In some brick & mortar stores, the proportion of counterfeit and shoddy products is 30% or even higher. Moreover, at the end of 2022, the ratio of illegal nicotine products is 79%, while the ratio of illegal e-liquid is 93%.

In the first nine months of 2022, the number of unannounced inspections on the retail tobacco market is three times less than last year. In the third quarter of 2022, 60 physical stores did not conduct spot inspections, and the procurement lines of 79 retail entities were not inspected. Compared with 2021, less than 2.5 times more cases of administrative crimes were filed in 2022.

The National Committee to Combat Illicit Trafficking in Industrial Products established a particular task group to reduce the illicit tobacco and nicotine products market. Its jobs include strengthening the movement of these products across borders, imposing responsibilities on transport companies, strengthening commitments on markets to facilitate long-distance trade, etc. The working group will schedule its first meeting of 2023 on February 21.

Although the Ministry of Finance has extended its works, the harmonization of excise tax rates among the EEU countries has yet to be harmonized. The persistent discrepancies in excise tax rates and the uncontrolled flow of goods between those countries lead to the availability of cheap illegal cigarettes in Russia. Due to uncontrolled prices and open borders, there will be no way to reduce illicit trafficking under existing regulations.

According to data from the Russian Statistical Service, Russian tobacco companies produced 222 billion cigarettes in 2022, which decreased by 7% from the previous year.

Reference: Потери бюджета РФ от нелегального оборота табака за 9 месяцев 2022г. превысили 60 млрд руб.