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Bootleg booze costs Ukraine $330 million a year in uncollected taxes

January 12, 2022 2:31 pmby Natalia Datskevych
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The Accounting Chamber of Ukraine estimated annual tax losses from bootleg alcohol at $330 million. (Senivpetro/Freepik)

Nearly one-third of the alcohol market in Ukraine is unregulated, according to the World Health Organization. This costs the state big bucks.

According to a Jan. 11 report by the Accounting Chamber of Ukraine, bootleg alcohol sales are costing the country's government $330 million (Hr 9 billion) in excise taxes each year.

The report says the Ministry of Finance and the State Fiscal Service failed to “fully implement” their electronic excise tax stamp system, used to track alcoholic beverages in retail stores and see if the product was in the tax service database.

While the State Fiscal Service announced the launch of the system in February 2020, the pilot project was only presented in June 2020.

The Chamber’s audit also showed that the work of the State Customs Service was also largely ineffective.

Since 2019, customs officers have seized 158 tons of spirits and 25 tons of alcoholic beverages, as well as 2 million fake excise stamps. But 74% of this haul was returned to former owners by court decisions, indicating that the customs seizure decisions were unfounded, and that the court fees were a waste of state resources, according to the report.

Moreover, the outdated software system used by the State Customs Service to control excise tax stamps forces inspectors to do extra paperwork, which “reduces control efficiency.” 

The Chamber recommended bringing excise tax legislation up to date. 

Natalia Datskevych
Author: Natalia Datskevych

Natalia Datskevych is a business reporter at the Kyiv Independent. Before joining the team, she worked as business reporter for the Kyiv Post. She studied economic theory at Kyiv National Economic University and holds a Ph.D in economic science.

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