The State Tax Service has refused to issue a licence for the production of tobacco products to Vynnykivska Tobacco Factory LLC. The company, which is located in the Lviv region, is under investigation for suspicion of illegal cigarette production, and searches are currently underway. This was reported by journalist Yevhen Plinsky, who actively covers the fight against the black tobacco market, Komersant ukrainskyi
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“It seems that the 246-year history of the Lviv Tobacco Factory is coming to an end. The unique production facility, founded in 1778, was destroyed by a handful of greedy businessmen who turned the factory into a tool for criminal activity,” the journalist wrote.
Plinsky published an official letter from the State Tax Service, dated 2 July, signed by its acting deputy head Yevhen Sokur.
The reason for the refusal was the company’s non-compliance with the legal requirements for certification of tobacco production, as well as the lack of necessary permits from the sanitary and epidemiological service and state fire supervision authorities.
Plinsky noted that for hundreds of years, Lviv Tobacco Factory was known in Europe as a unique tobacco production facility with a name, but thanks to the actions of the last owners, it has become a pan-European problem in a few years and has become a major supplier of smuggled cigarettes.
“But everything comes to an end, and the state’s patience also has limits. We thank Grigory Petrovich Kozlovsky for destroying the factory,” the journalist concluded.
In June of this year, the American Chamber of Commerce in Ukraine called on the government to start a real fight against the shadow economy.
“State budget losses from illegal markets in various sectors of the economy are enormous. The shadow trade in tobacco products alone resulted in budget losses of UAH 42.5 billion (over USD 1 billion) in 2022/23. These funds could have been used to purchase thirty F-16 fighter jets, which are critically needed to protect the skies over Ukraine,” the American Chamber of Commerce noted.
Searches at tobacco factories
In May, the Bureau of Economic Security conducted 24 simultaneous searches at the production and warehouse facilities of five Ukrainian tobacco producers, including Vynnykivska Tobacco Factory. The searches uncovered counterfeit excise stamps and evidence of counterfeit cigarettes.
Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Taxation and Financial Policy, noted that the illegal production of tobacco products in Ukraine has now been stopped. In particular, three Ukrainian tobacco companies have lost their licences, and searches are ongoing at the Vynnyky Tobacco Factory in Lviv region. Its licence was not cancelled as it had expired.
In June of this year , the management of the Vynnyky Tobacco Factory announced that it was being blocked and taken over by raiders.
According to them, a raider seizure is taking place, and the Ukrainian budget has already lost billions of hryvnias in tax revenues due to the blocking of the factory.
“In fact, the activities of one of the largest taxpayers in Western Ukraine are being blocked. If we calculate the damage caused to the budgets of all levels, taking into account the plan to under-supply the relevant products, the amount of damage to the budget already exceeds more than UAH 2.5 billion. For better understanding, this is about 100,000 fpv drones that could have been purchased for Ukrainian defenders. But this was prevented by the raider seizure and blocking,” said Oleksiy Riznyk, a lawyer, Honoured Lawyer of Ukraine.
We would like to add that two patrol policemen were injured during the searches at the Vynnyky tobacco factory in Lviv region.
The BES said that in the evening of 11 July, detectives conducted investigative actions in the town of Vynnyky in Lviv district. During the searches, a group of unidentified persons aggressively obstructed law enforcement officers in the performance of their duties.
“In particular, about 50 athletic-looking people, together with representatives of the factory, forcibly pushed patrol police and BES officers off the factory premises and did not allow them to enter the premises for the search. At the same time, some of them illegally took the products from the search site and loaded them into a car. Subsequently, these individuals tried to take the tobacco products out of the territory, despite the fact that they had been seized in accordance with the inspection report,”
– the BES press service said.
The Bureau of Economic Security added that the people blocked the patrol car and started jumping on it. Two law enforcement officers were injured. They are currently in hospital. The BES noted that the searches were carried out legally – as part of criminal proceedings under a court order.
As a reminder, in March 2023, 1.6 million packs of cigarettes without excise duty were found at a tobacco factory in Vynnyky. This amounts to UAH 85 million in taxes.
We would like to add that in October 2021, investigators of the State Bureau of Investigation already conducted searches at the Vynnyky Tobacco Factory. It was an investigation into an attempted smuggling of cigarettes worth UAH 27 million to the EU. In 2021, an investigation by the analytical agency Kantar Ukraine found that Vynnyky Tobacco Factory produces 62% of illegal cigarettes with Duty Free labelling.
Vynnykivska Tobacco Factory is one of the largest taxpayers in the Ukrainian tobacco industry. In 2023, the company paid over UAH 7 billion in taxes to the state budget.