The volume of the illegal tobacco market in Ukraine reached 20.2% of the total market in February 2023, and more than half of it was products marked duty-free, said MP Yaroslav Zheleznyak in Telegram channel on Monday, referring to the report Kantar.
“Fresh data from the Kantar report on the illegal tobacco market: data for February 2022 – 20.2%… The main part of the “illegal” was products marked “duty-free” – 10.8%, “- he wrote.
According to the data presented by Zheleznyak, the share of illegal products was only 5% in June 2020 but by August 2022 it reached 21.9%. At the same time, contraband dropped from 3% to 1.8%, counterfeit products dropped from 1% to 8%, and duty-free labeled products dropped from 2% to 12.2%.
By November, the share of illegal products, as noted in the Kantar materials, was reduced to 17.8%: contraband decreased to 1.4%, counterfeit products – to 5.2% and duty-free – to 11.1%.
The increase by February was due to an increase in counterfeit products to 7.9%. The materials posted by the deputy indicates that 83% are counterfeit boren international tobacco companies without counterfeit excise stamps, while 17% are cigarettes of Ukrainian tobacco manufacturers with signs of counterfeit excise stamps: “Ukrainian Tobacco Production” – 9% and “United Tobacco” – 8%.
Among the brands labeled for Duty Free or for export, sold illegally, the main one is Compliment (62%), and another 8% from Lifa, while among the producers the main share of Vinniki tobacco factory – 75%, and another 5% from “United Tobacco”, noted in materials published by the deputy.
He pointed out with reference to the report that the loss of the state budget because of the uncollected taxes reached 22 billion UAH for the year. “This is 279 tanks, 560 armored personnel carriers or 136 bikers,” – explained the deputy
The materials specify that 35% of illegal tobacco products sold through kiosks, 33% – through stores, 19% – street vendors and 10% in open markets.
As reported, the head of the Parliamentary Finance Committee Danil Hetmantsev estimated the monthly loss of revenue from the three excisable products in the state budget at $ 1 billion.
According to the Ministry of Finance, excise tax revenues totaled 9.9 billion UAH in April, compared to 9.8 billion UAH in March, 7 billion UAH in February and 5.3 billion UAH in January.
Parliamentary Finance Committee at a meeting on the situation on the excisable goods market in May 2023 recommended the State Tax Service of Ukraine to inspect the manufacturers and importers of tobacco products on the production and circulation of raw tobacco. It also sent recommendations to the Bureau of Economic Security of Ukraine and the National Police of Ukraine to take measures to detect and suppress: the illegal activities of plants for the production of alcohol and producers of alcoholic beverages.
The share of illegal tobacco products on the Ukrainian market in February-May 2021 increased by 3.1 p.p., to 15.9%, this is the maximum indicator, mainly due to the growth of illegal sales of products labeled as Duty Free, as well as those intended for export.
Such data were published by the Kantar Ukraine research institute through a survey of 3,300 adult smokers throughout the country, as well as by studying the origin of tobacco products in circulation.
According to the study, the total volume of illegally sold cigarettes since the beginning of the year, including May, amounted to 7.21 billion pieces, which led to a shortfall in the state budget of UAH 13.2 billion in tax deductions.
Kantar clarified that in May 2021 the share of counterfeit products on the Ukrainian cigarette market increased by 1.8 p.p. compared to February – up to 4.2%, the share of products labeled for Duty Free and export illegally sold in the country – by 1.3 p.p., to 8.2%, while the share of smuggled cigarettes decreased by 0.1 p.p., to 1.6%.
According to the results of the study, the average annual level of illegal sales of tobacco products in January-May 2021 increased by 2.1 times compared with the indicator for the entire 2020 – up to 14.4%. At the same time, since the beginning of this year, the share of counterfeits in the domestic cigarette market has grown by 3.1 p.p. compared to the data for 2020 – up to 5.1%, the share of products marked for Duty Free and export illegally sold in Ukraine – by 4.8 p.p., to 7.6%, while the share of smuggled cigarettes decreased by 0.5 p.p., to 1.7%.
“In addition to another growth in the volume of illegal tobacco products, another feature of 2021 is that there is a change in the distribution channels for illegal products. In 2021, three times more illegal tobacco products were sold through kiosks and stores than in 2020,” analyst from Kantar Ukraine Tetiana Sverdlyk said.
The institute clarified that 62% of tobacco products illegally sold as export or Duty Free products are marked as produced by the Vynnyky Tobacco Factory (Vynnyky, Lviv region) and are marked as not intended for sale in Ukraine. The share of unidentified manufacturers is 20%, United Tobacco LLC (Zhovti Vody, Dnipropetrovsk region) – 15%.
The most common brands of this group of illegal products are the Compliment brand marked as Duty Free – with a share of 47%, as well as those intended for export, but sold in Ukraine, namely Marshall (13%), Marvel (10%), Urta (8%) and Jin Ling (6%). The total share of these brands in this product group was 84%.
Kantar noted that 49% of smuggled cigarettes are products of Grodno Tobacco Factory (Belarus), 15% are from Moldovan factories. The most common smuggled brands are Credo, Fest, Queen, Dove, NZ, Ritm.
It is specified that 63% of illegal products are distributed in seven regions of Ukraine, most of all – in Odesa and Kharkiv (13% each), Donetsk (10%), Dnipropetrovsk (8%), Zaporizhia, Khmelnytsky and Lviv (6% each) regions.
The share of illegal tobacco products in the Ukrainian market in February 2021 amounted to 12.8% versus 5.8% in February 2020, the figure is the highest since 2011 and is mainly due to the growth of illegal sales of cigarettes and Duty Free products intended for export.
Such data were published by the research institute Kantar Ukraine by order of the ten largest Ukrainian manufacturers of tobacco products.
According to researchers, 62% of illegally sold tobacco products in the country have a mark of production at Vynnyky Tobacco Factory (Vynnyky, Lviv region) and are labeled as export or Duty Free products not intended for sale in Ukraine. The share of unidentified manufacturers is 23%, and United Tobaco LLC (Zhovti Vody, Dnipropetrovsk region) – 15%.
The most common brands of this group of illegal products are the Compliment brand marked as Duty Free – with a share of 50%, as well as those intended for export, but sold in Ukraine, Marshall (14%), Jin Ling (9%), Marvel and Urta (6% each). The total share of the named brands in this product group is 84%.
Kantar noted that 42% of smuggled cigarettes are products of Grodno Tobacco Factory (Belarus), and 20% are products of Moldovan factories. The most common smuggled brands are Credo, Queen, Ritm, Oris, NZ and Armeyskiye (Moldova).
The study showed that 63% of illegal products are distributed in six regions of Ukraine. Most of all – in Kharkiv (14%), Donetsk and Odesa (13%), Dnipropetrovsk (9%), Mykolaiv (7%) and Khmelnytsky (6%) regions.
According to Kantar, the share of illegal products sold through legal trade channels continues to grow: in February 2021, some 36% of illegal products were distributed through stalls, 29% – shops, 23% – open markets, and 9% – street trading.
Researchers estimated state budget’s losses from unpaid taxes at UAH 11.8 billion over 2021.
