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Tobacco Prohibition Law: will we think or will we fault?

Tobacco Prohibition Law: will we think or will we fault?

Tobacco smoking is a drug addiction. This was the beginning of public hearings on the anti-tobacco draft laws within the framework of the session of parliamentary Commission for social protection, health and family held by its Chairman Vladimir Hotineanu.

This meeting reminded interactive detective with the unsolved ending. Anti-smoking law package presents the amendments to several laws, aimed at preventing tobacco smoking. The purpose is to restrict children to smoke, or to breathe of tobacco by the non-smokers.

The problem is that these amendments were written by the doctors without consultations with market or public finance operators. All in all, this law was approbated by the government and now is discussed by the parliamentary commissions.

The situation requires serious clarification. The ultimate goal is understandable – to eliminate tobacco use, especially among children and adolescents. But the adoption of the abovementioned amendments will lead to serious negative consequences for the economy, budget and smokers’ health.

Let's start with the conclusions: the adoption of anti-tobacco package in this form will lead to:

1. Moldova will be filled with cigarette smuggling (especially from Transnistria).
2. Many different brands of cigarettes of the unknown origin will appear.
3. Chisinau tobacco factory "Tutun-CTC” (a state-owned enterprise, which employs 600 people) will face bankruptcy.
4. 2/3 of the tobacco kiosks will be closed, which will affect vulnerable citizens (pensioners) as well as the Social Fund contributions and local budgets.
5. The state budget, which gained about 1 billion lei (4% of total state budget) from tobacco excises in 2013, and about 1.2 billion this year, is unlikely to receive even half of this amount that means losses of about 600 million.
6. The level of corruption and unfair «competitive» struggle will increase.
7. The risk of the increased level of corruption and different interpretation of certain provisions of the law which already contradict to other legislative acts.
8. Appearance of some parasitic companies which will have the right to have the single register of cigarette brands.

Transnistria as the largest producer.

It is not a secret, that two years ago the policy regarding the tobacco industry in Transnistria has changed- now only raw materials are imported in the region. At the same time, almost all famous tobacco brands are presented in the Transnistrian shops but as it is claimed by the smokers, all cigarettes are practically of the same taste. All of them are produced at the factories of Transnistria, where it is not possible to protect the copyright.

According to some data, last year 10 billion cigarettes and raw tobacco materials, which allows producing 4 billion cigarettes more, were imported to the region. It can be reminded that tobacco consumption in Transnistria is estimated at 1 billion cigarettes a year, and 3-4 billion in Moldova. Moreover, according to some data, at the end of the year two lines for production of slim cigarettes that may be prohibited in Moldova were opened in the region. Local producers are already counting profits from the «export» of cigarettes in Moldova, after anti-smoking laws will come into force.

What is not permitted is prohibited!

Anti-smoking laws permit sale of cigarettes of only one standard – pack in parallelepiped form without any additives. It turns out that all slim cigarettes with aromatic additives and all unfiltered cigarettes will be withdrawn from circulation.

According to statistics, slim cigarettes account for 30% of the tobacco market in Moldova (90% in Azerbaijan); and cigarettes with additives - 15%, respectively. Unfiltered cigarettes are produced by Tutun-CTC only. Last year the total volume of production of the plant amounted to 3.26 billion cigarettes, and 36.6% accounts for unfiltered cigarettes.

It turns out that approximately 60% of cigarettes which are popular with smokers in Moldova will be withdrawn from circulation. Transnistria’s plants will be able to cover this deficit and the process would become uncontrollable and budget will lose minimum of 600 million lei, received from the excise taxes, not to mention Social Fund losses.

Geometry issues.

The law outlines the single permitted pack, which should have the parallelepiped form. This means that pack with rounded angles or with the embossed seal, will be illegal. Tobacco companies spend a lot of money to protect themselves and consumers from the counterfeit products by implementing various degrees of protection of their cigarettes and printing embossed logos and images.

As the General Director of "Tutun-CTC Ala Sirbu noted this decision would reverse investments of the plant, made in 2006-2007, in the amount of 108 million lei. Then Tutun-CTC acquired the German line for the production of cigarettes in round packs. The plant is the state enterprise which in 2013 transferred to the budget 251,6 million lei and 16.1 million lei to the Social Fund, employing almost 600 workers.

If the authors of the law could not give a final definition what the pack should be, what we can say about those who shall carry out the law and control its execution: corruption risks are obvious!

Tax policy is not the decree.

Inconsistency of the provisions of the bill lies in the size of the warning about dangers of smoking, which should cover the cigarette pack. The authors of the law have insisted that it should cover the reverse of a cigarette pack by 65-75%, but not less than 64 mm.

In its turn, the Current Tax Code makes manufacturer gluing excise stamp on valve packs so that when you open it a brand was torn. What will you do with those packs, the size of which is 70 mm (also produced by Tutun CTC) - after required 0.6 mm! The authors of the anti-tobacco law created this contradiction, and no one could give a clear answer - how to resolve this situation: the sides expressed their opinions.

The fact that the authors of the bills understand little in the economy and entrepreneurial activity is proved and extremely small in terms of their projects for implementation of various provisions. So, it is necessary to remove all packs of cigarettes from the shelves at the same day, when it is published in Monitorul Oficial. To create a system of control of movement of EACH cigarette pack (from the time of production, through all dealers and suppliers to the end point of sale) only 6 months are provided.

Thus the opinion of market operators is not taken into account.

Prohibition of tobacco.

This leads to: appearance of products of dubious quality, criminalization of business; loss of governmental budgets and so on….

This was offered by the Chairman of the parliamentary Commission for budget and finance Veaceslav Ionita. He noted that combating tobacco in Moldova is carried out by excises, based on WHO recommendations and European Commission directives. Since 2008 excises on the tobacco products increased 4-fold and accounted for 9 euro for 1000 cigarettes and during this time the budget receipts from the sale of tobacco products increased from 120 million to 1 billion lei. Moreover, it is planned that within the next 10 years the excise will be increased 10-fold - up to 90 euro per 1000 cigarettes. As he stressed, the current version of the draft law, will lead to the influx of contraband and counterfeit products and Moldova will become the importer of dubious quality cigarettes. Veaceslav Ionita also noted that he stands for anti-smoking measures, but those who smoke shall be able to find legal quality products.

Due to the small area and educated population, Moldova is often used as a testing ground for «running-in» of such projects and services. For example, there were mobile operators, perfecting new technologies here before proposing them on the larger markets.

Now someone is trying to put the experiment on tobacco control and the restriction measures. Despite this fact, that European attitude in this regard is more legal.

For example, cigarette advertising on billboards in Germany is legally allowed. Recommendation of European Commission on the warning labels is 30% on the front side of the package and 40% - on the back, and every country has a right to increase the size, in Romania it makes 50% on the both sides. The excise policy in Europe provides that all cigarette brands are sold at the rather high price.

Restriction of smoking in public places in Europe is also allowed but smokers can do this at the places especially allocated for this purpose.

European anti-smoking policy also provides pre-school and school institutions lectures devoted to the harm of smoking and benefits of a healthy lifestyle. Europe and the United States -countries with the highest level of life on the planet have various governmental and non-governmental programs promoting sport and healthy life programs.

There is also a freedom of choice so many states do not restrict their citizens to smoke and as a result receive tax revenue. This also creates the conditions not to violate the rights of other people for the clean air.

Sale of cigarettes is a legal business as the sales of alcohol. You can regulate and limit consumption, protecting the rights of children and not smoking population, but not to violate the rights of the smokers, and the right of manufacturers and sellers to carry out legal entrepreneurial activity.

Administrative prohibitions never give good result. Really effective can be educational programs and promotion of the healthy lifestyle.

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