Attempts by the authorities to limit the list of places for the sale of alcohol and tobacco products, contained in bill No. 5805, registered on July 19 by MP Heorhiy Mazurashu (Servant of the People faction), will lead to an increase in the price of these products, and create additional financial burden for business, therefore it should be rejected, the European Business Association (EBA) said on its website on Friday.
According to the explanatory note to the document, the bill proposes to limit the sale of beer (except non-alcohol), alcohol, low-alcohol beverages, table wines, tobacco products, electronic cigarettes, liquids used in electronic cigarettes, devices for consuming tobacco products without heating them only to specialized fixed outlets (shops) where no other goods are sold than those listed above.
The association noted that this legislative initiative will require capital investments from businesses to equip separate sales outlets, which will lead to an increase in the price of legal products and an increase in the price gap between counterfeit and legal goods.
In this regard, the EBA appealed to parliamentarians with a request not to support such amendments and to reject bill No. 5805 during consideration.
“The number of official sales outlets may significantly decrease, or even disappear altogether, and thus encourage the consumption of counterfeit products. Questions are also raised about the timing of the proposed amendments. It is envisaged that the law will enter into force on the next day after its publication. Since it is physically impossible to create a place of trade in one day, this will stop the sale of alcohol and tobacco products in Ukraine for a long time,” the association said.
The EBA also notes that the proposed amendments may limit competition between business entities in the Ukrainian market. According to it, in most EU countries, there is no such experience of restricting trade in alcohol and tobacco products. In addition, there are no separate rules for regulating the sale of alcohol and tobacco products in public catering establishments.
“The bill does not take into account an assessment of financial and economic consequences of the introduction of such amendments for business and the state, for example, budget losses from a decrease in the number of licenses for retail trade in tobacco and alcohol products,” Svitlana Mykhailovska, the EBA Deputy Director for Advocacy, said.
According to her, the EBA shares the desire of the MP to minimize the impact of binge drinking and smoking on the nation’s health, but the proposed method is selective and inconsistent. In addition, the association did not see in the context of bill No. 5805 an analysis of law enforcement practice and statistical data, which would indicate the ineffectiveness and insufficiency of existing restrictions and bans on the sale of alcohol beverages and tobacco products.
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.
Chateau Chizay Winemaking Company LLC (Berehove, Zakarpattia region) plans to start producing sparkling wine, brandy and cognacs.
Investments in the launch of the last two products will amount to about $ 2 million, Hennadiy Hutman, the owner and founder of Chateau Chizay, said.
“We are planning to produce brandy and cognac. Now we are designing an alcohol storage facility for 63,000 dal. This will be a completely new line and a new direction in Chateau Chizay. Construction is planned at our primary wine-making plant, where grapes are processed. We also plan to produce sparkling wine that is another new direction for us. The target price of the project for brandy and cognac is approximately $ 2 million,” he said in an interview with Interfax-Ukraine.
Under favorable conditions, the company plans to launch the production of brandy and cognac in January-February, sparkling wine in 2021.
Answering the question about the impact of the pandemic on the sales of Chateau Chizay wines, the owner of the company noted that sales fell by 50% in the spring 2020 compared to the spring 2019.
“Now the market is reviving, but the uncertainty of the situation with the coronavirus is scary. If in the first months of the pandemic the fall was 50-55%, then since August there has been an increase, now there will be a decline again,” Hutman said.
Despite COVID-19, the winemaking company continued to open up new markets for its products, so in 2020 Chateau Chizay began delivery to Britain, Denmark, and signed a delivery contract with Japan, Norway and Mexico.
“Now we are preparing a small delivery, but it is still very interesting, to one of the wine-making regions, Hungary. We have been delivering our wines to the United States, Canada, Israel, and Australia for several years. This year we have shipped 50,000 liters of wine to Kyrgyzstan, this is a good and interesting market,” the founder of the company mentioned
The State Property Fund of Ukraine (SPF) has announced the holding of auctions for the privatization of the Marylivsky and Kozliv distilleries and the storage of alcohol belonged to the state-owned enterprise Ukrspyrt (both in Ternopil region).
According to a statement on the SPF website, the privatization auction of the Marylivsky distillery will take place on November 12, 2020.
The starting price of the facility is UAH 54.7 million.
The auction for the privatization of the Kozliv distillery will take place on November 13, 2020.
The starting price of the facility is UAH 37.6 million.
State-owned enterprise Ukrspyrt intends to sell 440,600 decaliters of alcohol in January 2020 against 255,170 decaliters in the same period in 2019 and associates this with the results of fight against production of counterfeit alcohol.
“These figures indicate not the fact that we began to produce or consume more alcohol in the country, but the fight against the shadow turnover of alcohol. The state focused on the elimination of counterfeit alcohol production schemes that previously existed at the plants of the enterprise. We are closely monitoring the cost of alcohol and the correct purchase of raw materials. And if we see any violations, we immediately change the heads of the plants. And this is already yielding results,” acting head of Ukrspyrt Serhiy Bleskun said.
According to Ukrspyrt, in January 2020 ten factories of the state-owned enterprise will work, while seven were operating in the same period last year.
In addition, the enterprise noted that in November-December 2019 the heads of six plants were changed, and video surveillance cameras with online broadcasting were installed at six plants.
Now the company is being prepared for transfer to the State Property Fund.
As reported, the law on the abolition of state monopoly on alcohol production from July 1, 2020, supported by the Verkhovna Rada on December 3, was signed by the president of Ukraine at the end of December 2019.
The Cabinet of Ministers has abolished licensing for imports and exports of ethyl, cognac and fruit alcohol, ethyl rectified grape and fruit spirit, alcoholic drinks and tobacco products.
The decision was made at a government meeting on July 24 with the subsequent coordination with Deputy Prime Minister for European and Euro-Atlantic Integration Ivanna Klympush-Tsintsadze.