Background:
Specific excise rates for tobacco products increased in Ukraine by 29.8% in January 2018, by 20% in January 2019, and by 9% in July 2019.

Objective:
The aim of the research is to estimate the impact of the excise increases on tobacco sales, tobacco industry profits and governmental revenue.

Methods:
Data published by Ukrainian official bodies and tobacco industry official reports were analyzed.

Results:
Reported cigarette sales decreased from 67.6 billion sticks in 2017 to 55.8 billion in 2018 (or by 18%) and 44.8 billion cigarettes in 2019 (or by 20%). Average cigarette retail price increased by 60% for two years. The cigarette pack net-of-tax price increased by 50%, while the inflation rate for two years was just 14%. Domestic cigarette production turnover (net-of-tax) was rather stable: 14.7, 15.9 and 15.3 billion UAH in 2017, 2018 and 2019, respectively. So, the average producer price (calculated as production value/number of sold cigarettes) increased by 59% in two years. The PMI reported that tobacco market (cigarettes + HTP) in Ukraine declined by 8% in 2018 and by 12% in 2019, but PMI revenue increased both years. Governmental tobacco excise revenue increased from 39.9 billion UAH in 2017 to 43.6 billion UAH in 2018, and 44.1 billion UAH in 2019.

Conclusions:
In 2018–2019 the tobacco excise rates increased in Ukraine by 69%. Cigarette sales decreased by 33%, while the governmental revenue increased only by 10%. Small revenue growth was caused by the HTP sales growth (partly caused by low excise rate for HTP) and the tobacco industry pricing policy. When the excise tax increases consistently, tobacco industry uses price over shifting in order to maximize short-run profits. However, the industry actually engineered a greater decrease in cigarette consumption than the excise increase alone.