Illegal Import of Tobacco and Alcohol: Filling a Legal Gap

According to Rossiya newspaper, Daniil Bessarabov, the First Deputy Chairman of the State Duma's Committee on National Development and Legislation in Russia, has stated that currently, there is only a maximum penalty of up to five years of imprisonment for illegally entering Russia with products from non-member countries of the Eurasian Economic Union (EAEC). However, there are no explicit consequences for smuggling between EAEC member states.

However, 1.4 billion "grey" cigarettes enter Russia each year, with over half of them coming from EAEC countries. Bessarabov noted that these illegal goods are typically smuggled into and out of Russia as transit goods, with approximately 90% of these products on the Russian market coming from these channels. As a result, Russia's budget loses over 121.6 billion rubles in tax revenue each year. However, this legal loophole can be filled by amending the criminal law.

In March 2022, tobacco and alcohol were classified as strategic commodities. There is a special provision in the criminal law for such products, with penalties now increased to a maximum of seven years of imprisonment. Bessarabov explained, "It is now unclear under which provision prosecutions for smuggling tobacco and alcohol should be conducted." The cabinet proposes defining the illegal import of tobacco and alcohol as strategic commodity smuggling. The proposal suggests setting a minimum penalty of a 300,000 ruble fine and a maximum penalty of one million rubles, with a possibility of imprisonment for up to five years, for the illegal import of tobacco products and alcohol from EAEC countries.

A lawmaker has expressed that the plan has received favorable evaluations from the Supreme Court. In October, this matter might be presented to the National Duma assembly.

Sergey Ryabukhin, the First Deputy Chairman of the Budget and Financial Market Committee of the Russian Federation Parliament, believes that the government has made significant progress in regulating the tobacco market. The government has implemented government oversight in the industry and designated the Rosalkogoltabakkontrol as the responsible department. Additionally, digital labeling has been introduced. By 2024, as part of the EAEC, a unified tobacco consumption tax should be implemented. Currently, these tax rates are noticeably higher in Russia, which is a major reason for the large influx of smuggled cheap tobacco from other EAEC countries. All these measures aim to minimize the share of illegal cigarettes.

Maxim Bashkatov, Director of the Central Market Legal Development Center, has cautioned that starting from August, Russia has increased import tariffs on wine from non-friendly countries. This has dealt a blow to the market for cheap wine. As there are no customs borders with EAEC countries, there is a temptation to engage in tax evasion for these alcoholic beverages. Criminal liability will deter illegal imports. The expert believes that "this is precisely the negative effect of restrictions on the supply of goods from non-friendly countries.

However, he believes that there is a significant issue with this proposal, which is how to detect and combat smuggling under open border conditions. This would require at least some funding to establish customs checkpoints and the like. Bashkatov believes that the effectiveness of this regulation will depend on this factor.