Main points
- The Ukrainian government is introducing an electronic system called eExcise to digitize excise stamps on alcohol and cigarettes, which involves the use of unique DataMatrix codes.
- The system will allow consumers to check the legality of goods through the Diya application and will contribute to the fight against the shadow market, reduce bureaucracy, and protect brands from counterfeiting.
Action will monitor alcohol and cigarettes / Shutterstock
The Ukrainian budget loses about 30 billion hryvnias every year due to the shadow market for excisable products. That is why the government has begun market reform and is launching the eExcise electronic system.
Will Ukrainians be able to check alcohol and cigarettes on their own?
As Deputy Minister of Digital Transformation Zoryana Stetsyuk explained, the new system provides for the complete digitalization of excise stamps for alcohol and tobacco, writes 24 Kanal .
Each pack of cigarettes or bottle of alcohol will have a unique DataMatrix code that will allow you to track the movement of the goods.
Zoryana Stetsyuk,
Deputy Minister of Digital Transformation
Essentially, businesses are moving from working with paper stamps to working with electronic stamps and digital recording of transactions. This is why a testing phase is needed so that manufacturers, importers, and other market participants can work through the process before full launch and configure their systems to work with eExcise.
According to the government's plan, the system should not only complicate the work of the illegal market, but also simplify the life of legal businesses. This includes reducing paper bureaucracy, automating processes, and providing additional protection for brands from counterfeiting:
- One of the main changes will be the ability for ordinary buyers to independently check the legality of the product through the Diya application.
- To do this, simply scan the code on the packaging.
If there is no information or the data does not match, it will be possible to report this. That is, for the first time, the consumer receives a real control tool simply in his smartphone,
– the official concludes.
How does the Ukrainian e-Excise tax differ from the European system?
Back in the fall of last year, it became known that the system was moving to the testing stage of full functionality. And from January of this year, they planned to add the ability to work even in offline mode.
According to Zoryana Stetsyuk, in February alone, the system has already processed about 2 million transactions. During this time, almost 2 million unique identifiers have been ordered and over 21 thousand electronic stamps have been activated:
- The Ministry of Digital Affairs also calls on small and medium-sized businesses to be more actively involved in testing the new system.
- The ministry adds that the Ukrainian e-Excise was created on the basis of the European Tobacco Track&Trace system, but the Ukrainian version received broader functionality.
- In addition to tobacco products, the system will also cover alcohol and will be able to work even without stable internet, which is especially important in Ukrainian conditions.
What does this mean for business?
For legal businesses, the launch of the system will mean additional digitalization of processes, but at the same time, less paper bureaucracy. It is expected to automate the ordering of excise stamps, simplify reporting, and better protect brands from counterfeiting.
The team has already developed the key functionality of the system, conducted a series of training webinars for businesses, and is conducting market testing. It is important that offline solutions were also developed in parallel, meaning the system is designed taking into account real working conditions in Ukraine.
– said Zoryana Stetsyuk.
Note! The launch of the eExcise system could significantly change the alcohol and tobacco market in Ukraine. At the same time, the success of the reform will depend on several factors: the technical stability of the system, the willingness of businesses to work according to the new rules, and the effectiveness of state control.
How does excise tax affect prices?
Since April 1, Ukraine has increased the excise tax on cigarettes by 10%, which will have some impact on the retail price. However, the main increase in prices is ahead. The increase in excise tax on cigarettes in Ukraine is taking place within the framework of European integration. The changes in April add 8-10 hryvnias to the price of a pack. Economist Oleg Getman said this in a commentary on Channel 24 .
According to the expert, the main excise tax increases are planned in the Tax Code and will take place in the coming years. Thus, the tax will approach the minimum rate of the European Union.
Oleg Getman,
economist, coordinator of expert groups of the Economic Expert Platform
In April, it's just a small technical increase. All the major increases will be from January 1st of each year. They bring us closer to the minimum rate of 90 euros per thousand cigarettes. Last year we already had about 80 euros, this year – 86 euros, 2027 – about 90, and on the 28th we reach the minimum EU level.
As the economist explains, the April increase is technical, because the share of excise duty in the retail price of cigarettes is less than the required 60%. To reach the required level, a coefficient of 1.1 is applied to the minimum excise tax liability. Accordingly, the excise duty automatically increases by 10%.
According to Oleg Getman, each subsequent stage of excise tax increase will, on average, increase the price of cigarettes by approximately 15–20 hryvnias .
From the current price of a pack, twice plus 20 hryvnias, and somewhere at this level they should stop. Probably, there will be no more than 200 hryvnias for a pack of good cigarettes,
– the expert suggests.
As economist Oleg Pendzin previously said in a commentary on Channel 24 , the increase in excise duty in Ukraine is being done so that Ukraine does not become an “enclave of cheap cigarettes” in Europe, where citizens of neighboring countries will go to buy them. The availability of significantly cheaper cigarettes in Ukraine was a sore point for European neighbors, the expert says.
Increasing the excise tax on tobacco products adds revenue to the state budget, but also affects the shadow share of the cigarette market. According to economist Oleg Getman, it is currently estimated at about 17% in Ukraine, and this percentage could be higher if it were not for the work of law enforcement, tax officials, and legislators.
At the cost of incredible efforts by law enforcement agencies, the State Committee for Economic Security, and tax authorities, the shadow share is now managed to be kept within 16-17%. This is quite a lot. When the excise tax was small five years ago, the shadow share was 3-5%. With the increase in excise taxes, the gap between the production of a gray pack and a pack with paid taxes is growing. Now it is almost 100 hryvnias,
– says Oleg Hetman.
What damage do shadow schemes bring to the state?
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The shadow economy in Ukraine causes losses to the budget of up to 1 trillion hryvnia, mostly due to salaries in envelopes, smuggling, and excise trade.
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Salaries in envelopes cause budget losses of 140-280 billion hryvnias, and gray imports and smuggling – 120-185 billion hryvnias.