On August 11, according to a report by TASS, the Russian Ministry of Finance has put forward a proposal to determine the minimum price for the circulation and sale of nicotine products (excluding export to areas outside Russia and the Eurasian Economic Union). The draft government resolution for this proposal was drafted by the Ministry of Finance and published on a legal portal website.
According to the explanation, the method proposed has already been applied in the Ministry of Agriculture's formulation of the minimum prices for tobacco products.
Meanwhile, e-cigarette liquids and hookah tobacco mixtures that do not contain nicotine are currently exempt from tobacco taxation.
Therefore, in formulating the formula to determine the lowest prices of these products, the tax rates of similar products such as e-cigarette liquid and water pipe tobacco are utilized.
According to the report, the proposal outlines steps to determine the minimum prices of heated tobacco products, e-cigarette liquid (including nicotine e-liquid and non-nicotine e-liquid), and non-tobacco hookah tobacco mixtures. The formula in the draft is summarized as a general form, and its calculation method is as follows:
The lowest price is equal to the tax rate on unit quality or volume multiplied by (1 + value added tax rate) multiplied by an increase factor. In the given formula, the increase factor reflects the production cost or import cost of the product, as well as logistics and infrastructure maintenance expenses. When calculating these factors, data on the cost and purchase price of manufacturers and importers of the relevant types of products are also considered.
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The increase coefficient in this formula reflects the production costs of a product or the procurement costs of an importer, as well as logistics and infrastructure maintenance costs. When calculating these coefficients, cost and procurement price data from manufacturers and importers of related types of products are also used.
The implementation of a minimum price will affect the illicit portion of the nicotine products market. However, it is worth noting that wholesalers and retailers who operate honestly have already been selling nicotine products at prices higher than the minimum price. Therefore, these businesses will not be affected by the resolution if it is passed.
References:
The Ministry of Finance has developed a procedure for determining the minimum price for nicotine-containing products.
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