In Ukraine, about 50% of the alcohol market is in the shadow, CEO of Nemiroff Yuriy Sorochynsky says.
“About 50% of the market is in the shadows. Excessive fiscalization of certain business processes leads to the emergence of shadow economy, which sells the product to the consumer at a price (tax-free) at the level of UAH 35 – UAH 40 per bottle (vodka 0.5 liter), when the price of a legal product is UAH 89,” he said during the online business forum “From Shadows to Transparency” of the European Business Association on Monday.
Sorochynsky said that the shadow market is currently estimated at about UAH 10 billion – UAH 12 billion.
“Our level of fiscalization of alcoholic drinks is one of the highest in the world. In Europe, the average taxation of alcoholic drinks is 23-25%, depending on the country. We have only 43% at the producer level. Additionally, there is another 5% retail excise tax on each bottle sold legally. We have high taxation, which creates unfavorable conditions for business,” the expert said.
He said that in order to combat the grey market in Ukraine, it is necessary to strengthen control over the production and circulation of alcohol, introduce branded control over the circulation of alcoholic drinks and an electronic consignment note.
As reported, on December 11, 2019, President of Ukraine Volodymyr Zelensky signed a law on the abolishing of the state monopoly on alcohol production from July 1, 2020, adopted by the Verkhovna Rada on December 3, 2019.
Presidential bill No. 2300 on the abolition of a government monopoly on alcohol production from July 1, 2020, has passed its second reading and has been adopted as a whole. It was backed by 284 lawmakers, namely 229 MPs from the Servant of the People parliamentary faction, three from Batkivschyna, 19 from the Holos (Voice) Party, 14 from the For Future parliamentary group, and 19 independent lawmakers. Bill No. 2300 on amendments to the law on state regulation of the production and sale of ethyl, cognac and fruit alcohol, alcoholic beverages, tobacco and fuels provides for the abolition of a government monopoly on the production of alcohol from July 1, 2020.
In addition, the bill allows business entities – regardless of their form of ownership – to produce alcohol with an appropriate license, and also provides for the full liberalization of alcohol exports from Ukraine.
A license for the production of ethyl alcohol is issued to enterprises with established round-the-clock video surveillance systems for the production and distribution of products. Disabling video surveillance systems is the basis for the refusal to issue a license or its recall, the document says.
At the same time, to protect the local commodity producer, the bill provides that only state-owned enterprises authorized by the Cabinet of Ministers will be able to import ethyl alcohol until January 1, 2024.
In addition, the bill provides for a ban on commissioning new alcohol production facilities before July 1, 2021. It also introduces an obligation to maintain jobs at privatized enterprises at 70% of the total number of employees for this period.
The bill also introduces mandatory denaturation of bioethanol with petrol from 1-10% for use in the domestic market.
