Russian Finance Ministry suggests criminal penalties for selling counterfeit cigarettes

Article by Vincent Yi ; Edited by Rui Tian - To solve the problem of illegal tobacco in the country, Russia will impose fines of 500,000 to 1,000,000 rubles (approximately $6,600 to $13,300 USD) or 1 to 3 years of forced labor on those who engage in large-scale production, purchase, storage, and supply of tobacco products without a license.

In two breaking news items, the Russian Ministry of Finance proposed imposing criminal responsibility for the production and sale of tobacco products without a license. If the bill is passed, manufacturers and suppliers of counterfeit cigarettes could face up to three years in prison.

The draft laws of the Russian Federation Criminal Code, Criminal Procedure Code, and Administrative Violations Code are currently being reviewed by the government's legal activity draft committee. The supporting documents prepared by the Ministry of Finance for these laws state that they aim to implement national regulation of the production and circulation of tobacco products.

"The Ministry of Finance has prepared a bill to introduce state control over the production and circulation of tobacco products, nicotine-containing products, and their raw materials under a separate industry law, and to establish specialized control," said the ministry's press service.

The bill proposes amending Article 171, Paragraph 3 to include the phrase "tobacco products, tobacco, nicotine-containing products, and their raw materials" in the content of the provision on "Illegal production and/or trafficking of ethanol, alcohol, and alcohol-containing products."

In the final version, the provision will stipulate that the large-scale production, purchase, storage, and supply (including import to or export from the Russian Federation) of tobacco products, tobacco, nicotine-containing products, and their raw materials without the corresponding license will result in fines of 500,000 to 1,000,000 rubles, or 1 to 3 years of forced labor, or the equivalent of 1 to 3 years of income of the offender.

Experts claim that the share of illegal tobacco products on the Russian market has increased from 1.5% in 2016 to 10.7% in 2021. According to the audit chamber, the total federal budget losses from the sale of illegal "tobacco" from 2016 to the first half of 2021 amounted to 295.6 billion rubles (approximately $4 billion USD). This includes 246.3 billion rubles ($3.3 billion USD) in excise tax losses, 49 billion rubles ($657 million USD) in value-added tax losses, and 3 billion rubles ($40 million USD) in income tax losses.

Representatives of the tobacco industry believe that the bill will help to combat the illegal circulation of tobacco products. The representative of Japan Tobacco (JTI) in Russia stated, "We support the comprehensive bill prepared by the Ministry of Finance."

The representative of Philip Morris International's affiliate in Russia believes that the measures being prepared will further reduce the share of the illegal market and increase revenue for the national budget.

References: 

[1] The Ministry of Finance proposes imposing criminal penalties for the sale of fake cigarettes.