Combatting Counterfeit Goods to Boost Economic Growth
KEY CONCLUSIONS
Goods labelling helped Russia in the fight against counterfeiting
"Many decisions have been made that have helped reduce the volume of illegal and counterfeit products across various sectors of the economy in our country. <...> Gasoline and other fuels, <...> according to recent expert estimates, the volume of such products decreased almost threefold. <...> large volumes of illegal <...> trafficking existed in light industry, particularly in the footwear sector. <...> The decision was made to label goods <...> the volume of illegal traffic was reduced significantly, <...> in five years it was almost halved. With regards to the labeling system the state made a very good decision when it was created. <...> This really is a digital breakthrough in our country. <...> We now have 12 product categories under labeling," Viktor Evtukhov, State Secretary – Deputy Minister of Industry and Trade of the Russian Federation.
"The expansion of the labeling system <...> will help to cleanse the market. Once, we have already passed similar measures in the alcohol industry, and as the labeling system was fully introduced in alcohol production at all levels, <...> it contributed to a significant improvement of the market, up to 20–25%. <...> We now expect that as the labeling system is rolled out in tobacco and in the light industry, it will clear those markets as well," Alexey Sazanov, State Secretary – Deputy Minister of Finance of the Russian Federation.
Residents of Russia actively are helping the authorities in identifying counterfeit goods
"There's an app called Honest Mark. At the moment it has 3.5 million users. This number is growing. <...> people check the authenticity of goods, <...> they can check additional properties. For example, this week we launched <...> labelling for milk and dairy products. It allows you tocheck the shelf life, <...> this is one of those things that are often manipulated. Through this tool you can make a complaint, <...> leave an official inquiry," Mikhail Dubin, Chairman of the Board of Directors, Advanced Technologies Development Center (ATDC).
"Now, everyone can go to the Honest Mark app and check any goods. Information about the declaration or the certificate will appear. <...> Consumers are interested in this information. We created a <...> form on our website where consumers can type in the number of the certificate and declaration, find out whether it even exists or not. The inquiries have been summarized.What surprised me was that in general people check various foods," Nazariy Skrypnik, Head, Federal Service for Accreditation.
PROBLEMS
Taxation base is imperfect
"Regarding taxes, there is a serious gap compared with the cost in neighboring countries. Taxesfor one pack of cigarettes are at about 19 rubles. And, let's say, it can be 30 rubles in other countries, when converted into roubles. <...> This contributes to the growth of counterfeit products. <...> This causes serious damage to the budget," Faruk Yener, Area Director, Russia, Central Asia & Belarus, BAT.
"In the Union State, in EEC, there is a big difference between the tax burdens. In Belarus today the tax is almost four times lower than in the Russian Federation. <...> There is such a category as heated tobacco. Today the rate in the Russian Federation is seven times higher than the similar rate in Kazakhstan. There is a colossal prerequisite that in the absence of control, this imbalance of rates will lead to the Russian legal market suffering," Sergey Slipchenko, Vice President for Corporate Affairs in Russia and Belarus, Philip Morris International (PMI).
Passive regional governments
"We have created headquarters in each region, or rather, commissions under the heads of regions, headquarters to counter illegal trafficking. <...> The question is how active or passive control and supervisory bodies work in the regions. Some think: a tool has been created, we do not even have to work that hard anymore. It is like ‘came, saw and prosecuted’ – or did not prosecute, depending if the labels are there," Viktor Evtukhov, State Secretary – Deputy Minister of Industry and Trade of the Russian Federation.
SOLUTIONS
Increasing inspections and penalties
"The labeling system helps us a lot, but the sanctions are not grave enough. <...> It is necessary to confiscate the equipment <...> on which illegal tobacco products are made, and the vehicles in which they are transported. Everyone must be held accountable for their actions. If you are transporting illegal products, more excisable products, you understand what you are doing. You make more money, but you must also have more risks," Viktor Evtukhov, State Secretary – Deputy Minister of Industry and Trade of the Russian Federation.
"It is important that all stores have some kind of control, regardless of whether it is some remote town or a key anchor city in the country. <...> It is necessary to increase the number of inspections, including directly in the retail outlets, they are the most difficult to control. It is necessary to act in the legislative field. <...> It is worth increasing the amount of fines for the sale of illegal products, because we understand that it serves as an example to certain degree,"Faruk Yener, Area Director, Russia, Central Asia & Belarus, BAT.
Working with consumers
"We need to notify the consumers, so that they make an informed choice, <...> so that there is a civic position," Sergey Slipchenko, Vice President for Corporate Affairs in Russia and Belarus, Philip Morris International (PMI).
"A few words about the research: <...> 82% of the surveyed younger generation bought counterfeit products, and 69% will continue to buy counterfeit products. <...> There is a gap between consumer values and their actual behavior. The role of public organizations, the business community, state institutions of power is to raise the general level of consumer consciousness," Baysolt Khamzatov, First Vice President, Anti-Counterfeiting International Organization.
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