Saturday, December 10, 2022

Ukraine allegedly loses $40 million in taxes due to shady gasoline production

by Natalia DatskevychJanuary 20, 2022 9:32 pm
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Ukraine's illegal gasoline market expands in 2021, costing the state $40 million in unpaid taxes. (Freepik)

Ukrainian imports of chemical solvents skyrocketed by 86% to 132,000 tons in 2021, according to the Kyiv-based A-95 consulting group.

While such chemicals are commonly used in the paint and varnish industry, in Ukraine, the increase in imports of solvents points to a different trend.

“This is a booming increase, but in counterfeit gasoline production,” Sergiy Kuyun, head of A-95 consulting group, in his wrote for Liga.net on Jan. 18.

According to him, every fifth liter of gasoline produced in Ukraine is produced illegally, which means that illegal gasoline constitutes some 500,000 tons out of a total 2.4 million tons. As a result, the state budget lost $40 million in unpaid excise taxes last year, a procurement watchdog Nashi Groshi reported.

Nearly 95% of all solvents, or 125,000 tons, were imported from Russia and Belarus. The flow of chemicals from Belarus has tripled over the last year, up to 58,000 tons.

Three quarters of all imported solvents were used to illegal produce the A-92 gasoline brand, says Kuyun.

The scheme saves up to $0.5 per liter for producers, amid a 25% jump in official petrol prices in 2021, which now stand north of $1.1 per liter.

Additionally, chemical solvents were added to pure gasoline after it was produced out of oil at small refineries, according to Oleksiy Movchan, a lawmaker representing the governing Servant of the People party.

Overall, there are 25 of such refineries across Ukraine, says Movchan. With no proper equipment, they are able to produce only low-quality fuel, he adds.

“When buying six liters of such a mixture at a dubious gas station, you are guaranteed to get five liters of low-quality gasoline and one liter of additives,” said Movchan. 

According to him, such gasoline doesn't meets environmental standards, as it contains sulfur and toxic lead, and may harm car engines due to high combustion temperature.

As of November, the State Environmental Agency detected more than 7,200 tons of counterfeit fuel, whose components did not match required standards. Fines totaling $530,000 were imposed on fuel sellers.

Meanwhile, Ukrainian gasoline and diesel fuel market in 2021 grew by record year-on-year 7% up to 10.3 million tons. 

Natalia Datskevych
Natalia Datskevych
Business reporter

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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