According to the October report of Kantar Ukraine, the share of illegal products on the Ukrainian tobacco market has reached almost 22%. Also, the war significantly increased the opportunities for the machinations of counterfeiters.. The result of their economic aggression is more than convincing: according to Kantar Ukraine (Kantar is the world's leading data processing, analytics and consulting company), in 2022, 8.5 billion illegal cigarettes will be sold on the shadow market of Ukraine, the state will miss its budget.

“This is 560 armored personnel carriers, or 279 tanks, or 136 bayraktars,” said the head of the parliamentary committee on finance, tax and customs policy Daniil Getmantsev.

[see_also ids\u003d"

Cigarettes in cellophane bags.

As soon as the large-scale armed aggression of the Russian Federation in Ukraine began, the news caught my eye, illustrated by transparent plastic bags with cigarettes poured into them. Information in the news was presented as an aid to the army. Although in fact it was quite clear that we were talking about the beginning of another aggression - an organized economic activation of counterfeiters who took advantage of a good moment for them to bite off the maximum piece of the cigarette market.

And there was something to bite. For example, the four largest legal players in the tobacco market (international tobacco companies) before the war were consistently among the top ten largest taxpayers of the state budget, usually headed by well-known oil and gas companies - PJSC "

It was these legal cigarette manufacturers that provided about 7% of all taxes paid to the state budget of Ukraine - about UAH 78 billion. Of this amount, UAH 63 billion is an excise tax, which accounted for 40% of all (tobacco products, alcohol, oil products) excise revenues to the state budget. In addition, industry leaders gave $435 million. export earnings and provided decent wages to 50,000 of their employees.

However, since 2020 the situation began to worsen.. Not critical at first.

"

The fact is that it was in 2020 that the share of illegal products in the cigarette market rapidly increased.. If in August 2020 it was 6.9%, then in October it reached 10%. Doubled in a year. And the data for August 2022 already indicates a 21.9 percent share of the “shadow”.

The negative trend began in 2017. Then in a year the volume of the " But which of the officials could be frightened by the growth of the \? Who among them could believe that in just five years the share of the “shadow” would increase tenfold and take a significant amount from the state budget?

Officials are used to the fact that tobacco taxes, and in particular a high excise tax, are the lifesaver for the state budget.. The latter, if necessary to patch up the budget or simply at the request of the populists, was raised twice, or even three times a year, without thinking about the consequences. And they were not slow to tell.

Of course, it is not easy now for an impoverished Ukrainian to refuse illegal cigarettes that cost UAH 30-40 per pack, if the price of a legal pack includes only taxes - excise tax, VAT, retail excise - at least UAH 44. But the “white” manufacturer must still cover the cost of production and make a profit from his business.. Therefore, a " But illegal products are sold without paying any taxes.. This provides it with a price advantage and a high level of profitability of the shadow business..

We should not forget about the reduction in market volumes, because the consumption of legal products has decreased, because part of the population (including smokers) is in the occupied territories, another part has gone abroad.

Features of the current "

The main component of illegal products on the market is no longer smuggling (as it used to be), but fake (counterfeit goods) and products labeled Duty Free or for export, which are illegally sold in Ukraine.

If smuggling in the latest study by Kantar Ukraine is only 1.8%, then counterfeit is 8%, and strange Duty Free and imitation of export goods are generally more than 12%.

If earlier the lion's share of illegal products was sold in the markets and street vendors, now shops and kiosks are mainly used for sale (together 64% of the distribution of illegal products).

As you can see, the “generals of the shadow” are no longer even hiding, they sell products mainly through legal distribution channels..

How is the state protected

Operation "

And the state continues to increase the excise tax further, thereby increasing the appetites and incomes of excise evaders. After all, the smallest annual increase in specific excise tax rates by 2025 is 20%. It is provided for by the 8-year schedule of annual increases in tobacco excise tax rates adopted by BP.. This means that in less than a month in Ukraine there will be another increase in the excise rate on cigarettes - by another 20%.. And the price of legal cigarettes will increase by at least another 10 UAH.

So we are rapidly catching up with Europe in terms of taxes, but, unfortunately, not in terms of state budget losses from the activities of shadow companies.

Since 44 UAH of taxes per pack is not the limit. Economic incentives are on the side of counterfeiters and fraudsters. They will try to get deeper into the pocket of the state. In fact, the only hope is to protect the security forces. Although in such an economic situation this is a task and not an easy one for them.

Naturally, a belligerent state should and will continue to fill its budget in all possible ways.. Therefore, an effective counteraction to illegal trade is urgently needed.. And on an ongoing basis.

Given that the cigarette market suffers primarily from counterfeiting, fake Duty Free and imitation of exports, in order to reduce shadow operations, it is necessary to identify and stop the hidden production of cigarettes within the country.

Such work is underway, but it is not enough with today's massive abuses.. Every sixth pack of illegal cigarettes is a counterfeit of the brands of four international tobacco companies present in Ukraine.

Counterfeit cigarettes found in Ukraine during 2022 were produced on 25 different production lines located in different parts of the country. It got to the point that counterfeit cigarettes are sold even on the Internet and social networks..

According to experts from the Bureau of Economic Security, “estimated losses from non-payment of taxes by these companies amount to UAH 90 million per month”.

The greatest achievement of the security forces this year was the revocation of the license of the tobacco factory United Tobacco LLC in the city of Zhovti Vody, Dnepropetrovsk region.

“Representatives of the State Tax Service, the Security Service of Ukraine and the Office of the Prosecutor General completed a two-month search at the United Tobacco tobacco factory (United Tobacco LLC, Zhovti Vody, Dnipropetrovsk region), as a result of which its semi-legal activities were suspended,” Interfax-Ukraine news agency reported..

According to the head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy Daniil Getmantsev, seven state-of-the-art cigarette production lines were arrested and dismantled at the factory.. “Since 2015, the factory has become a symbol of Ukrainian corruption, saturating the market with excise-free tobacco with the tacit consent of all law enforcement officers who are “blind” to the work of a super-powerful enterprise,” Daniil Getmantsev told NV Business.

Raids of the BEB, the Ministry of Internal Affairs, the prosecutor's office, the SBU constantly reveal underground production of cigarettes throughout Ukraine.

In particular, BEB discovered a large illegal production of famous brands of cigarettes in the Odessa region. The total cost of tobacco products and equipment is UAH 150 million. Here, clever businessmen, using enterprises controlled by them, set up the illegal production of cigarettes of famous brands with forged excise tax stamps..

In Dnipro, SBI employees stopped the activities of an underground factory that produced counterfeit cigarettes on an industrial scale. “Only one line of the factory produced four thousand cigarettes per minute,” they said..

Together, the security forces exposed an interregional underground cigarette manufacturing workshop in Bukovina (Chernivtsi region). And the Lviv regional prosecutor's office discovered an illegal tobacco factory in the Volyn region. Its production capacity allowed to produce up to 20 thousand. packs of cigarettes per day.

By order of the head of the Ministry of Internal Affairs, Denis Monastyrsky, the National Police continued the “Excise” operation, the main goal of which is to stop illegal trade without paying taxes in the fuel and tobacco markets.

But, despite the obvious intensification of the actions of the security forces, the situation on the cigarette market remains difficult.. After all, shadow products continue to increase their competitive advantage in price over legal products, which will become even more expensive from the new year due to a new excise increase..

[votes id\u003d"

Read more articles by Sergey Sledz at the link.