Business calls on G7 to step up fight against Ukraine’s illicit cigarette market

20/ 08/ 2025

The European Business Association is deeply concerned about the rapid growth of illicit trade in cigarettes, e-cigarettes, and e-liquids in Ukraine. This trend poses a serious threat not only to consumer health and safety but also to the national economy. Excise tax is a vital source of revenue for the state budget, especially under martial law conditions. For instance, in the first half of 2025, the general fund of the state budget received UAH 62.7 billion from excise duties on domestically produced and imported excisable goods. However, at the same time, the share of the shadow tobacco market in Ukraine is growing rapidly. According to research, in April 2025, the level of illegal cigarette trade reached 16.2%, up from 14.1% at the beginning of the year. Experts estimate that this trend could lead to annual budget losses of UAH 25.2 billion. The situation in the e-liquid market is even more critical: in 2024, 92.3% of all e-liquid sales were identified as illegal. For example, in the first four months of 2025, no excise stamps were purchased for imported e-liquids, and only a small quantity for domestically produced products. This indicates not only the further expansion of the shadow market segment but also a potential loss of approximately UAH 4.94 billion in tax revenues for the state by the end of the year. Illicit e-cigarettes market players are primarily developing their businesses by evading regulatory requirements, for example, selling components separately to avoid taxation and manufacturing tobacco and nicotine products without a licence. Such practices undermine fair market competition and deprive the state of crucial financial resources. In light of this, the European Business Association has appealed to the G7 countries to strengthen their support for Ukrainian law enforcement agencies in combating the illegal trade in excisable goods. The business community especially emphasises the need to uncover and block illegal distribution networks of tobacco products and to introduce stricter penalties for those involved in the illegal production and circulation of cigarettes, e-cigarettes, and e-liquids. The EBA expresses its gratitude to international partners for their ongoing support and joint efforts to promote a transparent and competitive business environment in Ukraine.

Excise tax is a vital source of revenue for the state budget, especially under martial law conditions. For instance, in the first half of 2025, the general fund of the state budget received UAH 62.7 billion from excise duties on domestically produced and imported excisable goods.

However, at the same time, the share of the shadow tobacco market in Ukraine is growing rapidly. According to research, in April 2025, the level of illegal cigarette trade reached 16.2%, up from 14.1% at the beginning of the year. Experts estimate that this trend could lead to annual budget losses of UAH 25.2 billion.

The situation in the e-liquid market is even more critical: in 2024, 92.3% of all e-liquid sales were identified as illegal. For example, in the first four months of 2025, no excise stamps were purchased for imported e-liquids, and only a small quantity for domestically produced products. This indicates not only the further expansion of the shadow market segment but also a potential loss of approximately UAH 4.94 billion in tax revenues for the state by the end of the year.

Illicit e-cigarettes market players are primarily developing their businesses by evading regulatory requirements, for example, selling components separately to avoid taxation and manufacturing tobacco and nicotine products without a licence. Such practices undermine fair market competition and deprive the state of crucial financial resources.

In light of this, the European Business Association has appealed to the G7 countries to strengthen their support for Ukrainian law enforcement agencies in combating the illegal trade in excisable goods.

The business community especially emphasises the need to uncover and block illegal distribution networks of tobacco products and to introduce stricter penalties for those involved in the illegal production and circulation of cigarettes, e-cigarettes, and e-liquids.

The EBA expresses its gratitude to international partners for their ongoing support and joint efforts to promote a transparent and competitive business environment in Ukraine.