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Abstract
Introduction This study offers a comprehensive examination of the pricing strategies/dynamics used by the tobacco/nicotine industry in response to tax increases using Ukraine as a case study during the 2019–2022 tax reforms. This period saw the introduction of new tax categories for heated tobacco products (HTPs) and electronic cigarettes (e-cigs) with concomitant tax increases. This is the first systematic consideration of taxation on these products. The primary objectives are to examine how tax changes influence product pricing and how HTPs are priced vis-a-vis cigarettes, particularly in the context of harmonisedspecific tax rates.
Methodology NielsenIQ monthly price and sales data for cigarettes, HTPs, and e-cigs, along with official tax data, were used. Tax pass-through analysis was conducted to examine the relationship between tax increases and retail prices by market segment, with net revenue calculations used to evaluate impacts.
Results The industry usually overshifted taxes on cigarettes (mid-price and premium), HTPs, and e-cigs while undershifting on economy cigarettes during the study period. However, a big HTP tax increase in 2021 was not overshifted to a great extent. The industry also employed a price-smoothing strategy where initial price increases following tax increases were kept moderate, with further increases introduced gradually throughout the year.
Conclusion The study shows that the industry has used tax increases on HTPs and e-cigs as an opportunity to raise prices but with lower net revenue per stick. The findings suggest that fully harmonising HTP taxes with those on traditional cigarettes could limit the industry’s pricing strategies and hence help reduce consumption and generate additional government revenue.
- Cessation
- Economics
- Nicotine
- Taxation
- Tobacco industry
Data availability statement
Data may be obtained from a third party and are not publicly available. The pricing dataset used in this study was licensed from Nielsen Consumer LLC. Due to licensing restrictions, these data are not publicly available. Access to data can be requested directly from NielsenIQ under specific licensing agreements. While the data on taxes can be obtained from the website of the official website of the Ukrainian parliament (https://tax.gov.ua/nk/rozdil-vi--aktsizniy-podatok-/).
This is an open access article distributed in accordance with the Creative Commons Attribution Non Commercial (CC BY-NC 4.0) license, which permits others to distribute, remix, adapt, build upon this work non-commercially, and license their derivative works on different terms, provided the original work is properly cited, appropriate credit is given, any changes made indicated, and the use is non-commercial. See: http://creativecommons.org/licenses/by-nc/4.0/.
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WHAT IS ALREADY KNOWN ON THIS TOPIC
Taxation is a cornerstone of tobacco control, but the industry often undermines it through targeted pricing strategies, as previously observed with excise taxes on cigarettes.
New-generation products like heated tobacco products (HTPs) and electronic cigarettes (e-cigs) are marketed as reduced-risk alternatives but remain less regulated and taxed inconsistently compared with cigarettes.
Limited evidence exists on the industry’s pricing and tax pass-through strategies for HTPs and e-cigs, especially in countries with harmonised tax policies.
WHAT THIS STUDY ADDS
The industry applies differential tax pass-through, overshifting taxes on premium products while undershifting on economy cigarettes and HTPs, and smooths prices to mitigate tax impacts.
HTPs were priced between mid-price and premium cigarettes after the 2021 tax reforms, reflecting strategic efforts to sustain profitability despite increased taxes.
E-cigs exhibited most variability in pricing, highlighting the evolving nature of this market segment. This evidence can inform tax policy design to enhance public health.
HOW THIS STUDY MIGHT AFFECT RESEARCH, PRACTICE OR POLICY
Provides a replicable framework for analysing tax pass-through and pricing strategies across diverse tobacco/nicotine products, supporting further research on tax harmonisation impacts in varied contexts.
Emphasises the importance of continuous monitoring of industry pricing to ensure tobacco control measures effectively reduce consumption and do not inadvertently benefit the industry.
Demonstrates how tax harmonisation reduces market segmentation and supports higher taxes on HTPs and e-cigs, alongside cigarette taxes, to curb overall tobacco/nicotine consumption.
Introduction
The increasing use of heated tobacco products (HTPs) and electronic cigarettes (e-cigs), represents a new frontier in global tobacco control efforts.1 Unlike combustible cigarettes, which have been increasingly regulated and taxed in many countries, these new products are often marketed as reduced-risk alternatives with less regulation and lower taxation,2 3 appealing particularly to younger consumers who are often drawn to the technological allure of these devices.4 5 However, the long-term health effects of these products remain uncertain,6–8 and while some evidence suggests such products may assist in smoking cessation, others indicate limited or inconclusive efficacy, particularly for sustained abstinence.9 Moreover, concerns persist that their availability could undermine cessation efforts by promoting dual use or delaying complete cessation.10 Their growing popularity also raises significant concerns among public health professionals regarding addiction, youth uptake,11 and the overall impact on smoking prevalence.12–14
As countries strengthen their tobacco/nicotine control policies, taxation remains a cornerstone of efforts to reduce consumption.15–17 However, the tobacco industry has been observed to continually adapt its pricing strategies to mitigate the impact of higher taxes to protect its profits, often undermining public health objectives.18 19 Numerous studies have explored how tax increases on cigarettes are passed on to consumers, whether through perfect pass-through, where the price increase equals the amount of tax increase; overshifting, where the price increase exceeds the tax increase or undershifting, where the price increase is smaller than the tax increase.20–23 However, there is a significant gap in our knowledge about how taxes on HTPs and e-cigs are translated into retail prices, and hence what pricing tactics the industry employs. Existing literature indicates that the price elasticities of HTPs and e-cigs (-0.5 to -1.8) tend to be higher than cigarettes (-0.3 to -0.7), suggesting that industry pricing strategies for these products might differ from those used for cigarettes.24 25 The novel products have experienced rapid growth in recent years,26 27 yet their taxation has been inconsistent across different countries, with many jurisdictions applying lower tax rates or failing to tax them at all.28–30 As the taxation of such products becomes increasingly common, understanding how the industry responds to their tax increases has become more urgent.
This paper is the first to address this gap by evaluating the pricing strategies of the industry in response to increasing taxes on HTPs and e-cigs using Ukraine as a case study. Ukraine, an Eastern-European country and the second-largest in Europe by area, has recently implemented tax reforms on these products. A key question that this study seeks to answer is how the industry positions these products relative to cigarettes in terms of pricing, especially when they are taxed similarly. Understanding this interaction is crucial, as it sheds light on the broader market strategies employed by the tobacco industry. One previous study examined the HTP market across 28 European and Asian countries, including Ukraine (2018 to 2020), but it used limited data from a single source and offered a broad, cross-national comparison across different regulatory environments.31 It found HTP taxes were undershifted, unlike the overshifting in cigarettes. However, despite undershifting, lower taxes on HTPs do not necessarily result in lower retail prices as these are set by the industry.
The granular, context-specific analysis of the tobacco/nicotine market in Ukraine herein aims to provide broader insights about the potential of taxation to influence the retail price of cigarettes, HTPs, and e-cigs. The Ukrainian tobacco/nicotine market is primarily driven by cigarettes, which maintain the largest market share despite declining sales. In contrast, HTP sales increased by 278% from 2019 to 2022, while e-cigs, though less widespread, are gaining popularity.32 In 2021, the government increased taxes not just on cigarettes but also on HTPs and e-cigs.11 33 34 The decision was motivated by both public health concerns, including the rising prevalence of new products, and broader factors such as efforts to harmonise taxation, address revenue gaps, and political motivations under new leadership.35–37 A 7-year annual tax escalator plan was implemented starting in 2018, increasing the specific excise on cigarettes by 28% initially and then 20% annually until 2024 to reach the minimum European Union (EU) tax level35 of €90 per 1000 sticks. In 2021, the specific tax on HTPs was harmonised with that of combustible cigarettes,38 imposing the same specific tax per 1000 sticks, equating one HTP stick to one cigarette for taxation purposes. Additionally, a new excise tax was introduced on all ‘electronic-nicotine-delivery systems’ regardless of nicotine content.39 As a result, Ukraine has become one of the few countries in the world where equivalent specific taxes on HTPs and cigarettes are being applied,40 contrasting with several EU states where taxation on these products is often not harmonised.41 Such harmonisation aligns with the WHO recommendations,42 which emphasise that a uniform taxation policy can prevent market segmentation and the potential emergence of products designed to circumvent existing regulations.
The average retail price of a pack of cigarettes in Ukraine has steadily increased due to these tax reforms, rising from approximately Ukrainian hryvnia (UAH)30 (€1) in 2017 to over UAH90 (€2.30) in 2024, with tax constituting 55.8% of the retail price in 2024.43 44 Meanwhile, the tax share for HTPs is approximately 52% (in 2024) of their price.45 The aforementioned fiscal policies and context provide a valuable opportunity to examine how industry pricing strategies adapt to changing tax environments and if price differentials between products/categories are maintained. By focusing on the pricing dynamics of HTPs and e-cigs, this paper contributes novel findings to the discourse on taxing tobacco/nicotine products. The findings will provide valuable insights not only for Ukraine but also for other countries seeking to implement or increase the taxation of HTPs and e-cigs, and hence inform global tobacco control strategies more generally.
Methodology
This study employs brand-level monthly data on retail prices and sales of cigarettes, HTPs, and e-cigs (both disposables and refillable) in Ukraine between March 2019 and February 2022, sourced from NielsenIQ, a global market research company. The period covers part of the ‘7-year plan’ (2018–2024) of annual growth of excise duty rates as well as the onset of COVID-19 in late March 2020.46 47 The study ends before the start of the war with Russia.
For each brand/product, the data includes the name of the manufacturer, the variant name, the number of sticks per pack for cigarettes/HTPs, and the number of millilitres (ml) and nicotine strength for e-cigs. Consistent with the previous tax pass-through studies,20 21 the brands for cigarettes were allocated to three well-differentiated segments along the price distribution: premium; mid-price; and economy. This segmentation was achieved through an analysis of monthly relative pricing, following the WHO’s methodology of weighted average price tertiles.48 Unlike cigarettes, HTPs and e-cigs showed little price variation preventing segmentation; therefore, all brands of HTPs and e-cigs were categorised into a single product group. To ensure the accuracy of estimates for the tax-paid market, brands with outlying prices and suspected of being illicit were excluded from the analysis. Mean sales-weighted nominal prices (henceforth mean price) were calculated to examine unit prices across the three product categories and cigarette price segments. The unit was defined as a pack of 20 sticks for cigarettes and HTPs, and for e-cigs, the example of the UK government was followed by assuming 0.15 mL of e-liquid is equivalent to a single cigarette and multiplying it by 20.49 Data analysis was conducted using SPSS V.29 and Microsoft Excel.
Net revenue was calculated per 20-stick pack for HTPs and cigarettes, and per single pod for e-cigs. Unlike previous approaches of standardising e-cigs per millilitre of fluid,50 our method allows for variations in product volumes and quantities. Official tax rates for all product categories were sourced from the Ukrainian parliament’s website.51 In Ukraine, cigarette taxes are a combination of specific and ad valorem excises, while only a specific excise is applied to HTPs (by stick) and e-cigs (by volume of e-liquid). During the study period, specific taxes on cigarettes increased from UAH694 to UAH1089 per 1000s sticks in addition to the ad valorem tax of 12% of the retail price (for more details on tax rates see online supplemental web-appendix table 1). A minimum excise is also applied on cigarettes if the combined specific and ad valorem taxes are less than the minimum excise level, ensuring no product is taxed too lightly (UAH773.20/€23.6 per 1000 cigarettes in 2019, annually increasing by 20% thereafter).38 Pass-through analysis requires estimating wholesale prices, which include excise taxes and the producer price. Since wholesale prices are not directly reported in available data sources, we inferred them using documented industry pricing practices from similar contexts.52 In doing this, we assumed a 5% profit margin for the retailer on the wholesale price. Retail price also includes a 5% local retail excise and 12% value added tax (VAT). Given this taxation structure, the final retail price can be derived as:
Supplemental material
Prices were standardised to constant March 2019 values and analysed to assess how tax changes were passed on to consumers after each budget implementation and whether this varied based on the magnitude of the tax increase and across the five market segments (HTPs, e-cigs, and three cigarette price segments). The industry’s net revenue was calculated by subtracting all applicable taxes and the wholesale/retail margin for each brand from the retail price. This reflects the net revenue the company earns per unit sold, after accounting for retail margins and all taxes. In this context, revenue (per unit) refers to the total income generated from sales before deductions (eg, taxes, discounts and allowances), while net revenue accounts for these deductions, offering a clearer picture of actual earnings per unit sold. Net revenue covers production and distribution costs, with the remainder representing profits.22 Since all price components—including excise taxes, margins and retail prices—were calculated in current prices for each period, inflation adjustment was not necessary. However, to ensure comparability across years and consistency in analysing price trends over time, all product net revenues were adjusted for inflation using the monthly Consumer Price Index (CPI).53
The pass-through analysis is categorised based on the direction and magnitude of price changes in response to tax increases (table 1). As previously explained, perfect shifting would lead to an equivalent increase in retail price, hence no change in net revenue. Overshifting will increase the price, resulting in positive net revenues, while undershifting will result in negative net revenues.
Examples of tax pass-through scenarios and their impact on net revenue
Results
Trends in cigarette prices
Figure 1 illustrates the nominal prices of a 20 pack of cigarettes and HTP, and an equivalent quantity of e-cigs between 2019 and 2022. All three cigarette price categories show steady price increases, with premium and mid-price cigarettes experiencing larger overall growth. The prices of HTPs showed consistent and notable growth, closely mirroring the overall upward trend in cigarette prices. However, the price increase was more pronounced than with low- and mid-price cigarettes and similar to premium cigarettes, especially in the 2020s, suggesting they may be positioned similarly in the market. In contrast, the prices of e-cigs showed more variability. They were consistently priced much higher than both cigarettes (across all segments) and HTPs. However, since 2020 (before the time of introduction of taxes on e-cigs in early 2021), they experienced a sharp decline in their prices. The prices stabilised later in the year, remaining higher than HTPs and cigarettes but showing minimal fluctuation during this period.
Mean nominal price trends between March 2019 and February 2022 in UAH. Source: authors’ own calculations, using the NielsenIQ database. Nielsen data on e-cigs were only available from May 2019. HTP, heated tobacco product; UAH, Ukrainian hryvnia.
Tax pass-through
See online supplemental web-appendix figure 1 for inflation-adjusted net revenue of cigarettes across the three price segments showing how changes in taxes are reflected in retail prices. Net revenue for economy cigarettes shows a decreasing trend since 2019, leading to negative values after 2021 and suggesting that their taxes have been undershifted. In contrast, the premium segments display positive net revenues, with consistently rising prices that indicate a greater-than-expected pass-through of taxes. The mid-price segment appears relatively stable, suggesting minimal overshifting.
Supplemental material
Figure 2 presents net revenue, with notable dips observed across all cigarette segments in the beginning of each year between 2020 and 2022, followed by recovery later in the year (except for economy cigs). These fluctuations suggest that the industry may be smoothing the prices by initially absorbing some of the tax increases before gradually passing them on throughout the year. Since these dips are observed in both inflation-adjusted and nominal price analyses, they likely reflect actual pricing strategies rather than artificial effects of CPI adjustment. For HTPs the trend before 2021 is mostly upward, with smaller fluctuations. However, there was a sharp decline in early 2021, at the time of the change in tax regime. But net revenue has started growing since then, although to a much lower level than before. Net revenue for HTPs followed the premium cigarettes at the beginning of the study period but later came much closer to the mid-price category. The industry is also smoothing prices for HTPs with gradual and synchronised price adjustments that minimise sudden shocks to consumers. E-cigs initially recorded the highest net revenues but saw a notable decline over the study period, with revenues going lower than premium cigarettes since 2021’s last quarter.
Tobacco industry net revenue for cigarettes, HTPs and e-cigs between March 2019 and February 2022 in UAH. Source: authors’ own calculations, using the NielsenIQ database and tax data from the official website of the Verkhovna Rada. HTP, heated tobacco product; UAH, Ukrainian hryvnia.
Figures 3 and 4 align the changing net revenues with the trends in total taxes for HTPs and e-cigs. For HTPs, the total taxes increased steadily during this period, except for a particularly sharp rise in excise in 2021. The industry’s net revenue declined notably at that time but thereafter slowly recovered before a small dip at the time of the 2022 tax increase. Overall, the net revenue followed a price-smoothing pattern with a slight drop at the start of the year coinciding with the budget announcement and tax increase, followed by a gradual rise throughout the remainder of the year. This upward trend indicates increased taxes were ultimately overshifted to consumers.
Total taxes and tobacco industry net revenue in UAH per 20-sticks pack of HTPs between March 2019 and February 2022. Source: authors’ own calculations, using the NielsenIQ database and tax data from the official website of the Verkhovna Rada. HTP, heated tobacco product; UAH, Ukrainian hryvnia; VAT, value added tax.
Total taxes and tobacco industry net revenue in UAH per pod of e-cigarette (e-cigs) between March 2019 and February 2022. Source: authors’ own calculations, using the NielsenIQ database and tax data from the official website of the Verkhovna Rada. There was no specific and local tax on e-cigs before Jan 2021. UAH, Ukrainian hryvnia; VAT, value added tax.
Unlike HTPs, the taxes on e-cigs have only risen moderately since 2019, with relatively small specific taxes introduced in 2021. Industry’s net revenue shows an initial decline, likely reflecting price adjustments as the products entered the market, but then stabilised. This could suggest that the market was finding equilibrium, driven by changes in sales volumes rather than solely the initial impact of the modest tax increases, which, as indicated, are small relative to the overall price.
Cigarettes versus HTPs
Table 2 provides a comparative analysis of notable trends in pricing, net revenues, and sales volumes for cigarettes and HTPs for two major transnational tobacco companies (British American Tobacco (BAT) and Philip Morris International (PMI)) over the period from March 2019 to 2021. Notably, there is no comparison for e-cigs as they were not sold by BAT and PMI in Ukraine according to the dataset used. Since data for March 2022 was unavailable, February data was used as a proxy. To ensure compatibility, the sales volume for February was adjusted to reflect a 31-day month. There was a notable decline in cigarette sales volumes across all price segments for both companies, whereas HTP sales volumes saw an increase in both cases. Mean prices show a gradual increase over the period. In terms of net revenue, cigarettes demonstrate an upward trend, whereas for HTPs, the revenue increased between 2019 and 2020, followed by a sharp decline in 2021 but has recovered from that point onwards.
Comparison of BAT and PMI’s sales volume, mean nominal retail price and net revenue for cigarettes and HTPs in UAH
Discussion
This study provides a unique examination of pricing trends for HTPs and e-cigs, revealing how the industry employs well-established pricing strategies. It highlighted consistent overshifting of taxes across most product categories while undershifting on economy cigarettes. The study also uncovers the use of price-smoothing strategies, where prices are gradually adjusted throughout the year following annual tax increases. This minimises sudden price shocks, stabilises consumer demand and helps the industry preserve revenue. These strategies reflect the industry’s adaptive response to tax policies and its efforts to mitigate the impact of taxation on sales.
For cigarettes, the premium segment exhibited a steady increase in net revenues, reflecting the highest degree of overshifting. This trend is influenced not only by market positioning but also by the structure of Ukraine’s tax system, where ad valorem taxes are calculated based on the maximum retail price (MRP), which is set by the industry and includes all excises and VAT. As a result, any increase in the MRP leads to a proportional increase in the ad valorem tax component, contributing to higher overall taxes and hence prices for premium brands. In contrast, the economy segment exhibited greater volatility, with a declining pattern since 2021, suggesting that the industry may be strategically limiting price increases in this category to maintain affordability and market share. By maximising revenue from premium products while keeping lower-priced brands accessible, the industry potentially offsets losses in the economy segment with higher margins on premium brands. This differential tax-shifting strategy on different price segments of cigarettes aligns with global research. Similarly, pricing tactics have been documented in many high-income countries such as the UK,22 23 54 the US,55 56 Ireland,57 some EU countries58 and New Zealand,59 as well as in several low- and middle-income countries, including Mexico.60–65 Additionally, evidence from previous studies highlights the use of price-smoothing as a common industry tactic. Two studies from the UK found price-smoothing and highlighted that the time over which prices were increased was most pronounced in the lower-price segments.19 22
The prices of HTPs followed a pattern similar to that of cigarettes, while e-cigs exhibited greater variability. After the 2021 tax reform, the industry closely aligned HTPs with the mid-price cigarettes. This strategic approach likely aimed to safeguard profits while maintaining affordability for consumers, ensuring price stability despite tax increases. However, for both tobacco companies examined, HTP prices were at or above the prices of their premium cigarettes, suggesting that the companies are positioning these as premium products. Notably, this positioning did not change over time, indicating that the tax on HTPs did not impact their target price point. This approach, coupled with robust industry net revenues despite significant tax increases, indicates continued strong market demand for these products, likely driven by consumer dependence.
There was a noticeable decline in total cigarette sales volume during the period, dropping from 3 686 929 million sticks in 2019 to 2 198 037 in 2022. Simultaneously, HTP sales surged from 183 438 to 843 038 million sticks between 2019 and 2022, reflecting a growing consumer preference for these products (online supplemental web-appendix table 1). These trends align with findings from the Euromonitor market research database.66 Crucially, the variations in tax pass-through observed could be influenced by pre-announced tax increases in Ukraine. This advance notice allows the tobacco industry to strategically prepare for price adjustments, potentially reflecting shifts in consumer demand across price segments or the industry’s pricing strategies in response to upcoming tax increases.
The analysis underscores that while the prices of HTPs and e-cigs often exhibited higher prices than cigarettes, the lower tax rates imposed on these products suggest significant profit margins for the industry and thereby function as an inherent subsidy. This indirect subsidy not only undermines efforts to reduce tobacco use but also provides the industry with a competitive advantage, allowing them to circumvent the intended public health outcomes of higher taxation policies. Furthermore, the higher net revenues, despite tax increases, highlight the industry’s ability to overshift taxes, enabling them to generate substantial profits. This dynamic benefits manufacturers at the expense of the government, which could have collected the higher revenues as taxation.
The findings emphasise that the Ukrainian government still has substantial scope to impose even higher taxes to further curb consumption. Such measures would not only advance public health objectives but also support broader economic and political goals, particularly in the context of Ukraine’s EU accession process.67 68 As a candidate country, Ukraine is obliged to adopt stricter tobacco control measures that align with the EU’s regulatory standards, notably the Tobacco Tax Directive, which seeks to reduce tobacco use and regulate taxation to promote health. Recently, the Ukrainian Parliament passed legislation to increase excise on cigarettes, but the industry successfully lobbied for smaller tax increases on HTPs.69 70 A key argument used to justify these lower rates was that neither the EU nor its member states currently apply the same excise taxes to cigarettes and HTPs. As previously discussed, lower tax rates on HTPs function as an industry subsidy rather than contributing to public health goals.16 71 72
This study’s relevance extends beyond Ukraine as more countries grapple with the rise of HTPs, e-cigs, and even nicotine pouches. The Ukrainian experience offers insights into effective tax policies. Equalising taxes on HTPs provides a positive reform model that other countries could follow to prevent these products from escaping proper taxation. While some countries have created distinct tax categories for HTPs, many still apply lower taxes, often based on weight rather than per stick, which complicates enforcement and increases tax avoidance. For example, Israel has fully harmonised HTP taxation with cigarettes by applying the same excise formula to both products.73 Similarly, Germany taxes HTPs at 80% of the amount of excise duty applicable to cigarettes.74 To prevent product substitution and enhance tax equity, Ukraine could apply the cigarette ad valorem tax to HTPs and e-cigs, ensuring consistency across products. Implementing such measures in Ukraine would create a more robust system that discourages tobacco consumption, enhances public health and increases government revenue.
Strengths and limitations
One of the key strengths of this research is its use of detailed actual monthly pricing data, allowing for an in-depth analysis of industry responses to fiscal policy changes across different product categories. Moreover, the study is timely and contextually relevant, conducted during a period marked by significant tax reforms. This context underscores the importance of maintaining and enhancing tax revenues, making the study’s findings crucial for both immediate and long-term policy planning. Therefore, the findings can inform future tax policies, especially in ensuring that taxation effectively reduces consumption and maximises revenues.
While the data used is comprehensive, limitations exist, including that it is commercially provided by an external party. There may be unknown gaps from informal sales and methodological challenges in data collection/publication. Despite this, the data is generally considered to be reliable,75 providing average monthly brand-level price estimates based on the value of sales and units sold from diverse sources like electronic point-of-sale systems, ‘retail audits, and open markets.’ It has therefore been widely used in past research.76–79 Additionally, official tax rates sourced directly from the parliament further strengthen the accuracy of the analysis. Detailed segmentation was possible for cigarettes, but the same level of analysis could not be applied to HTPs and e-cigs. For HTPs, all the primary brands are positioned within the same price range, making detailed categorisation unnecessary, while for e-cigs the market shows considerable variation with a wide range of products, but the dataset only included information on a limited number of brands. This limits the granularity of the findings related to these products.
The findings are highly relevant to Ukraine but may not fully translate to other countries, especially those with different regulatory environments or levels of market maturity. Furthermore, the study assumes a constant wholesale/retail margin, which might not fully capture market complexities. Variations in these assumptions could lead to different conclusions regarding the extent to which taxes are passed on to consumers. Lastly, the onset of the COVID-19 pandemic during this period might have altered typical market behaviours and consumption patterns. That said, it cannot be overlooked that this was also when significant tax changes took place and HTP use was rising, making it an unavoidable and important context for the study, therefore adding layers of complexity that enrich the analysis.
Conclusion
The findings of this study have significant implications for policy makers. They highlight that the industry has strategically used tax increases on HTPs and e-cigs to raise prices and boost revenues, leveraging differential shifting and price-smoothing strategies. These practices underscore the industry’s adaptability and determination to maintain profitability despite progressive fiscal policies. The harmonisation of specific excise taxes on HTPs with cigarettes in Ukraine is a groundbreaking policy with potential benefits for public health and revenue generation. However, the adoption of these reforms faced enormous resistance, criticism and repeated attempts by the industry to undermine the initiative through various legislative proposals and amendments. This ongoing challenge underscores the need for vigilance and advocacy to sustain and strengthen harmonised tax policies. Governments and public health stakeholders must collaborate to counter industry interference and ensure tax policies are implemented and maintained effectively. By doing so, they can protect public health gains, increase revenue, and promote equity in the taxation of cigarettes and new-generation products. The lessons learnt here can inform both national and international strategies, helping to shape more effective tobacco control policies worldwide.
Data availability statement
Data may be obtained from a third party and are not publicly available. The pricing dataset used in this study was licensed from Nielsen Consumer LLC. Due to licensing restrictions, these data are not publicly available. Access to data can be requested directly from NielsenIQ under specific licensing agreements. While the data on taxes can be obtained from the website of the official website of the Ukrainian parliament (https://tax.gov.ua/nk/rozdil-vi--aktsizniy-podatok-/).
Ethics statements
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References
Footnotes
X @ZainebDanish, @JRBranston
Contributors ZDS, JRB, and KW contributed to the original idea for the paper, conceived the research question and designed the study. ZDS performed data analysis and interpretation and authored the first draft of the paper with support from JRB. LO provided country-specific expertise. All authors reviewed and made contributions to the final version of the paper. The responsibility for any errors remains entirely with the authors. ZDS is responsible for the overall content (as guarantor).
Funding ZDS, JRB, and KW receive funding from Bloomberg Philanthropies, as part of the Bloomberg Initiative to Reduce Tobacco Use (www.bloomberg.org). The views expressed in this publication are those of the authors, as the funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.
Competing interests JRB owns 10 shares in Imperial Brands for research purposes. The shares were a gift from a public health campaigner and are not held for financial gain or benefit. All dividends received are donated to health-related charities, and proceeds from any future share sale or takeover will be similarly donated.
Provenance and peer review Not commissioned; externally peer reviewed.
Supplemental material This content has been supplied by the author(s). It has not been vetted by BMJ Publishing Group Limited (BMJ) and may not have been peer-reviewed. Any opinions or recommendations discussed are solely those of the author(s) and are not endorsed by BMJ. BMJ disclaims all liability and responsibility arising from any reliance placed on the content. Where the content includes any translated material, BMJ does not warrant the accuracy and reliability of the translations (including but not limited to local regulations, clinical guidelines, terminology, drug names and drug dosages), and is not responsible for any error and/or omissions arising from translation and adaptation or otherwise.