The budget has lost out on over 90 billion hryvnias due to illicit tobacco

Ukraine’s state budget has lost over 90 billion hryvnias over the years of full-scale war due to the illicit tobacco market. These figures are provided by the project “Monitoring of the Illicit Trade in Tobacco Products in Ukraine”, conducted by Kantar Ukraine, according to Ekonomichna Pravda.

In 2024, the level of illicit trade was reduced to 12.6% from 19.1% at the start of the year thanks to the actions of the Ukrainian Economic Security Bureau. However, by the end of 2025, the share of the black market had risen again, reaching 17.8%.

“First and foremost, this is due to the fact that in May 2024, large-scale searches began at the five largest cigarette manufacturers, regarding whom information about their illegal activities had been confirmed. The investigations lasted several months; illegal production was halted, and the illicit goods were sold from warehouses until such stocks began to run out,” says Tetyana Koshchuk, an expert at the Growford Institute.

Following the searches, the Economic Security Bureau reported the seizure of production lines and large quantities of raw tobacco. Unlicensed warehouses were discovered, comparative analyses of cigarettes were commissioned, and some of the implicated companies even lost their licences to manufacture tobacco products. All of this contributed to the positive results observed in 2024.

Experts also highlight the impact of excise duties. In the legal segment, taxes account for a significant portion of the price, whereas in illegal production they are not paid.

“Now that excise duty accounts for the bulk of the price – around 60% of the price of a pack – these schemes become very lucrative. If you don’t pay excise duty and VAT, the ‘saved’ difference amounts to as much as 100 hryvnias per pack. And excise duty will only rise; in line with the terms of European integration, it increases by 20% every year and is set to reach €90 per 1,000 cigarettes by 2028,” notes Oleg Getman, coordinator of the ‘Economic Expert Platform’ expert group

At the same time, according to Kantar Ukraine, around two-thirds of illegal products in 2025 originated from several Ukrainian manufacturers with valid licences.

“Identifying and dismantling the schemes of unscrupulous licensees must be a key objective for regulatory and law enforcement agencies,” emphasises Natalia Fesyun, CEO of the “Ukrtyutyun” Association.

The experience of 2024 has convincingly demonstrated that Ukraine already has all the effective mechanisms in place to combat illegal manufacturers. Experts are therefore unanimous in their view that the legislation has provided law enforcement and tax authorities with sufficient tools to eliminate shadow schemes. Experts believe that, provided law enforcement agencies work in a coordinated manner, the scale of the illegal market can be reduced.

According to Tetiana Koshchuk, for the fight to be successfully stepped up today, it is important that the law enforcement system – the Economic Security Bureau of Ukraine, the National Police, and the Tax Service – intensify their work within their respective areas of responsibility.

“8–10% is a target figure that should be set as a baseline by the end of 2026. Constant effort and sustained pressure are needed,” says Tetiana Koshchuk, a taxation expert at the Growford Institute.

It should be recalled that Danylo Getmantsev, Chair of the Tax Committee of the Verkhovna Rada of Ukraine, stated that he is dissatisfied with the pace of de-shadowing. In particular, this concerns the illegal tobacco market in Ukraine, which has grown from 12.6% to over 18%. According to the MP, this is linked to the low effectiveness of the Economic Security Bureau, which is tasked with combating shadow markets. However, experts and politicians say that the Bureau’s director is currently more focused on media relations and overseas trips than on the actual fight against the shadow economy. 

As previously reported by Forbes, representatives of big business, MPs and relevant associations have expressed disappointment with the effectiveness of the Economic Security Bureau under the leadership of Oleksandr Tsyvinskyi.