Ukraine is considering a radical increase in penalties for the illegal sale of electronic cigarette liquids, proposing to raise maximum fines to 250,000 hryvnias. Current sanctions of 26,000 hryvnias have proven ineffective against the backdrop of a massive shadow market, where illegal retail points generate about 7,000 hryvnias daily. Experts and the government insist on a comprehensive approach, including tighter controls by the tax service, the Bureau of Economic Security, customs, and border guards to protect the budget and legal businesses.
Scale of the Shadow Market and Ineffectiveness of Current Sanctions
According to experts, the bulk of illegal products in the e-cigarette segment is sold through individual entrepreneurs who operate without licenses to trade excisable goods. Such sellers evade value-added tax, excise duties, and other mandatory contributions to the state budget. A popular tax evasion scheme involves selling DIY mix kits where ingredients are sold separately. The average cost of such a kit is 350 hryvnias, whereas under fair taxation, its price would reach 430 hryvnias.
The current fine for retail trade without a license is 26,000 hryvnias, but violators easily cover these expenses due to high daily revenues staying at around 7,000 hryvnias. As a result, entrepreneurs continue to run shadow businesses while ignoring existing legislative restrictions. According to the State Tax Service, out of approximately 4,000 illegal e-liquid retail points identified in 2026, real fines were imposed on only 300 objects, highlighting gaps in law enforcement practice.
Comprehensive Measures and Interagency Cooperation
To reverse the situation on the market, the government of Ukraine initiated the development of a joint strategy to combat the shadow economy. Discussion of priority steps took place on October 21 at a working meeting involving representatives of specialized agencies, including Bureau of Economic Security Director Oleksandr Tsyvynskyi and First Deputy Head of the STS Yuriy Konyushenko. Meeting participants identified curbing illegal production, combating smuggling, and eliminating tax evasion schemes in the tobacco sector as top priorities.
Taxation expert Tetiana Koshchuk emphasizes that merely adjusting fine amounts is not enough to eradicate the problem. In her view, it is necessary to deploy the entire state apparatus: tax authorities and the BES must halt underground production, while customs and border services are required to completely block illegal raw material import channels. Only coordinated work by all agencies within a single state program can bring the e-cigarette market out of the shadows.
Significance of the Reform and Future Prospects
Strengthening control over the turnover of vape liquids is of critical importance for filling the state budget and creating fair competitive conditions. Legal market participants suffer significant losses due to unfair competition from shadow traders who sell products without paying excise duties. Implementing the measures outlined by the government will not only reduce the volume of illegal trade but also enhance consumer safety through strict quality control of sold products.
