The illicit tobacco market poses a threat to Ukraine’s European integration
Alexander Farkosh, Managing Director of JTI Ukraine, spoke about this in an interview with RBC-Ukraine.
How the share of the black market has changed
According to the company’s data, the level of illicit trade has fluctuated constantly over recent years:
“For example, in 2018, the illegal trade in cigarettes accounted for less than 5 per cent. With the outbreak of the war, the share of the black market grew, reaching a record high of 25.7 per cent in October 2023.
In 2024, thanks to the efforts of law enforcement agencies, increased scrutiny by the Parliament’s Tax Committee and the work of the Temporary Special Commission, as well as heightened attention from international partners, the illegal market was reduced to 12.6 per cent.
However, in 2025–2026, the trend turned negative once again. In other words, the level of illegal trade began to rise. But the key point is that we have a history of positive examples – meaning this phenomenon can be overcome,” noted Oleksandr Farkosh.
Budget losses and threats to the European Union
Last year, the state budget lost an estimated 26.5 billion hryvnias due to illicit cigarettes alone. Owing to the annual increase in excise duties, these losses could rise to 32 billion hryvnias by 2027.
In addition to domestic financial losses, large-scale smuggling poses a threat to European integration. Once the borders open, cheaper illegal goods from Ukraine could flood into the EU, causing billions in losses to European countries.
The launch of ‘e-Excise’ and risks to the market
The full-scale launch of the electronic excise stamp is scheduled for 1 November 2026. However, the business community sees risks in the technical unpreparedness of the system and the retail sector: currently, fewer than 1 per cent of operators are registered. A disruption in the supply of legal products could cost the budget up to 500 million hryvnias a day.
The company emphasises that new laws alone will not solve the problem. To combat the shadow economy, transparent rules and strong, independent institutions are needed, in particular the Economic Security Bureau.
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