In the first five months of 2026, Ukraine’s State Tax Service has revoked more than 5,200 licenses due to violations related to alcohol and tobacco sales. This significant enforcement action was detailed in an interview with Lesya Karnauh, the acting head of the tax authority.
The revocations stem from businesses engaging in schemes that involve the concealed cash sale of excess alcohol and tobacco products. Karnauh noted that the tax service is transitioning to a Track and Trace system, which will enable the monitoring of each individual bottle or pack of cigarettes, even beyond Ukraine’s borders.
Currently, the illegal tobacco market in Ukraine is estimated to account for 17.6% of total sales, resulting in a loss of approximately 26.5 billion hryvnias in tax revenue for the state budget last year. Karnauh explained that the tax authority has developed effective methods to detect hidden production surpluses in the excise goods sector. She cited instances where manufacturers, after upgrading their production lines, increase output but only report the old production levels, selling the surplus for cash.
“When we identify such practices, we take strict action, including revoking licenses. Many businesses lost their licenses in 2025 and the early months of this year because they thought they could operate unnoticed. They are not invisible,” Karnauh emphasized.
As part of its enforcement efforts, the tax service has already suspended over 5,200 licenses due to various violations within the current year. Karnauh also highlighted that Ukraine’s European integration necessitates the establishment of transparent institutions and the harmonization of legislation. The tax service is adopting a European model for controlling excise goods.
“The excise system we are implementing is based on the European Track and Trace system. An excise item must be traceable from the moment the label is affixed until it is used, regardless of where this occurs,” she concluded.
The shadow economy remains a critical issue for Ukraine’s tobacco sector. According to estimates from Kantar and industry representatives, the illegal market share is currently 17.6%. The counterfeit and illegal trade has resulted in a loss of about 26.5 billion hryvnias in tax revenues for 2025.
The extensive illegal tobacco market poses a significant barrier to Ukraine’s accession to the European Union. With the opening of borders and the formation of a unified market, Ukrainian counterfeit products could easily flood European markets, particularly Germany, causing substantial financial losses to the EU budget.
Ukraine's State Tax Service has intensified its crackdown on illegal alcohol and tobacco sales, revoking over 5,200 licenses in 2026. The move aims to combat a significant shadow market that has led to substantial losses in tax revenue and poses challenges for the country's EU integration.