The American Chamber of Commerce in Ukraine sounds the alarm: the shadow trade in tobacco products has dealt a devastating blow to the state budget, causing losses in the amount of UAH 42.5 billion (over USD 1 billion) during 2022/23. These funds could be directed to strengthening the country’s defense capabilities, in particular to the purchase of thirty F-16 fighter jets, which are critically important for the protection of Ukraine’s airspace.
This is stated in messages American Chamber of Commerce in Ukraine.
The scale of the problem and its consequences
According to the Kantar Ukraine study, although the overall level of illegal tobacco trade in Ukraine decreased slightly to 19.1% in the first quarter of 2024 (compared to 25.7% at the end of 2023), it still remains at an alarmingly high level. Annual budget losses from this phenomenon are estimated at UAH 24 billion, and the volume of the shadow cigarette market reaches an impressive 7 billion pieces.
Of particular concern is the fact that a large part (57%) of tobacco products illegally sold in Ukraine are labeled Duty Free or intended for export, and have an inscription stating that the producer is the Vinnykiv tobacco factory. Almost half of these illegal products are Compliment cigarettes labeled Duty Free (45%).
Countermeasures and perspectives
ACC emphasizes that the elimination of shadow markets will not only ensure a level playing field for business in Ukraine, but will also increase the country’s investment attractiveness. “In order to finance the fight for victory, Russia must pay, and the shadow economy must be liquidated,” the chamber said in a statement.
The decrease in the volume of the shadow market of cigarettes may be related to the strengthening of state control over the sale of illegal products. In mid-May, detectives of the Bureau of Economic Security of Ukraine conducted a large-scale operation, during which more than 1 million packs of counterfeit cigarettes were discovered and seized at the production facilities and warehouses of four manufacturers, including the Vinnykiv tobacco factory.
However, the fight against the shadow tobacco market requires a comprehensive approach, which includes not only the strengthening of law enforcement measures, but also the improvement of legislation, raising the awareness of citizens about the negative consequences of smuggling and counterfeit tobacco products, as well as cooperation with international partners to exchange information and experience.
The American Chamber of Commerce in Ukraine calls on the government and the public to join forces in the fight against the shadow tobacco market, which not only causes significant economic losses, but also undermines national security and the health of citizens.
