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The level of illegal trade in tobacco products remains record high

The level of illegal trade in tobacco products remains record high

Kyiv, September 14, 2023

The American Chamber of Commerce in Ukraine held a roundtable discussion on the solid excisable goods illegal trade issue with the participation of representatives of the US and Japanese Embassies, state authorities, "Ukrtyutyun" Association, and businesses. The event was aimed to promote the implementation of effective steps to combat the shadow market of excise goods and to coordinate the work of the Parliament, the Government, and law enforcement agencies.

The results of the latest survey "Monitoring Illegal Trade in Tobacco Products in Ukraine" conducted by Kantar Ukraine experts, were presented during the event. According to the presented research results, as of June 2023, the share of illegal tobacco products in the total market volume in Ukraine accounts for 19.5%. The share of products marked for Duty-Free remains significant - 10.9% and the share of counterfeit products amounts at 6.9%.

According to Kantar’s preliminary calculations, the tax revenue losses to the State Budget of Ukraine in 2023 from the illegal tobacco market are estimated at more than 21 billion hryvnias.

KPMG representatives presented their study of the markets of illegal tobacco products in Ukraine, the European Union, Great Britain, Norway, Switzerland, and Moldova in 2022. According to the study, Ukraine is the second largest market for the consumption of illegal tobacco products in Europe. According to the estimations of KPMG experts, the tax revenue losses to the State Budget of Ukraine in 2022 from the illicit tobacco market are estimated at UAH 26 billion.

The negative trend of the increase in the share of the shadow market of tobacco products, observed during the last few years, causes significant damage to the state and legitimate businesses because the competition is distorted, and the State Budget loses from the under-receipt taxes during the war. Therefore, AmCham Ukraine member companies believe it is important to combat the illegal market of tobacco products right now while Ukraine is striving for future EU membership.

The participants of the discussion emphasized the need to intensify the work to combat illegal production and circulation of tobacco products and establish coordination between the competent authorities. It is important to adopt the necessary changes to the legislation regarding the criminalization of tobacco smuggling, to improve the prosecution mechanisms for actions related to the illegal production and circulation of cigarettes, and to create an effective control system for the storage and destruction of confiscated products and equipment.

The event was attended by AmCham Ukraine Solid Excisable Goods Task Force members, who are year after year among the top largest taxpayers in Ukraine and in 2022 together paid more than UAH 78 billion in taxes – Philip Morris Ukraine, B.A.T. - Prylucky Tobacco Company, JTI Ukraine, Imperial Tobacco Ukraine.

The following guest speakers also participated in the event:

  • MP Halyna Yanchenko, Head of the Temporary Special Commission of the Verkhovna Rada of Ukraine on the Protection of Investors' Rights;
  • MP Yaroslav Zheleznyak, First Deputy Head of the Verkhovna Rada of Ukraine Committee on Financial Issues, Tax and Customs Policy;
  • Oleksandr Tarkan, Head of the Department of Supervision over Economic Security Bureau of Ukraine Compliance with Laws, Prosecutor General's Office;
  • Serhii Perhun, Deputy Director of the Bureau of Economic Security of Ukraine;
  • Ivan Pysarchuk, Deputy Head of the Unit - Administration Head of the Strategic Investigations Department of the National Police of Ukraine;
  • Eleonora Shkoda, Director of the Excisable Product Control Department, State Tax Service of Ukraine;
  • Andrii Chygorskykh, Head of the Control over Production, Circulation and Licensing of Alcohol, Alcoholic Beverages, Tobacco Products and Liquids Used in Electronic Cigarettes Unit, State Tax Service of Ukraine;
  • Oleksiy Kalynovych, Deputy Director of the Department for Combating Smuggling and Customs Violations, State Customs Service;
  • Representatives of the US Embassy and the Embassy of Japan in Ukraine.

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