BP may ban alcohol and tobacco with old excise stamps. What should businesses expect?
5 February 2024 14:15
The Verkhovna Rada of Ukraine may soon adopt a law that will ban the sale of tobacco products with old-style excise stamps. Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, wants to introduce the relevant amendments to the legislation, reports 
The parliamentarian introduced his own amendment to draft law No. 9662. According to it, tobacco products with the old excise stamps will be banned in Ukraine from 1 June, and alcohol products with the old excise stamps will be banned from 1 September.
The new excise stamps will be put into circulation on 1 September 2023. At the same time, the Tax Code does not currently restrict the sale of products with the old stamps. This means that manufacturers and retailers can sell products with the old stamps until they expire. This was intended to ensure a gradual transition to new brands.
Hetmantsev wants to change this with his amendment. He explains his position by saying that too many counterfeit products have allegedly appeared on the market. For example, the share of the shadow tobacco market is already 25%. His amendment is aimed at combating this phenomenon, and the Bureau of Economic Security and the Security Service of Ukraine have even requested it.
The bill is scheduled to be considered this week.
Business reaction
Market participants strongly disagree with the MP’s position. First of all, they point out that the statement about combating the shadow market is completely illogical, as the new rule will hit bona fide producers who have already bought the old-style excise stamp. That is, we are talking about “legal” market participants.
“Ukrtiutiun emphasises that the withdrawal of old excise stamps from circulation is not justified, as it will not reduce the share of illegal tobacco products. According to KANTAR Ukraine, as of June 2023, the share of illegal cigarettes in Ukraine was 19.5%. At the same time, about two-thirds of the illegal market is products without any excise stamps,”
– said the Ukrtiutiun association.
TheUkrainian Food Retail Alliance noted that the rule has a retroactive effect, which is prohibited by the principles of Ukrainian law:
“…such a decision has retroactive effect and contradicts the current legislation (clause 4 of Article 11 of the Law of Ukraine “On State Regulation of Production and Circulation of Ethyl Alcohol, Cognac and Fruit Alcohol, Alcoholic Beverages, Tobacco Products, Liquids Used in Electronic Cigarettes and Fuel”), which does not provide for a ban on the circulation of these goods until they are fully sold within the expiry date. Thus, businesses did not foresee such restrictions when planning their activities.”
TheEuropean Business Association (EBA) has stated that business losses, according to preliminary estimates, could reach tens of billions of hryvnias. They emphasise that re-labelling is technologically impossible, and that returning products to manufacturers would result in extremely high logistical costs. Hetmantsev, on the other hand, does not propose any mechanisms to protect businesses in this situation.
“The requirement to withdraw old-style excise stamps will cause unjustified losses to market participants due to the loss of products, because along with the proposal to withdraw the stamps, the state does not provide for reimbursement of the costs incurred by businesses for the manufacture and sale of excisable goods,”
– the EBA said in a statement.
Market participants urge MPs to reject Hetmantsev’s amendment.
