Photo Pixabay.comIn 2025, the state budget of Ukraine received about UAH 122 billion in excise tax from the sale of regular cigarettes and only UAH 0.5 billion from electronic ones. This sharply contrasts with the prevalence of so-called "vapes" in Ukraine. And the key reason is that 96% of this market is "in the shadows."
According to the Institute's estimates, in 2026 the losses of Ukraine's state budget due to the illegal vape market could reach at least UAH 18.3 billion. And already in 2027 they will grow to UAH 23.5 billion, in 2028 – to about UAH 30 billion.
To prevent this, the Growford Institute advises strengthening the fight against the most common shadow schemes in the electronic cigarette market – and, first of all, against the so-called "self-mixing kits."
"From 30 ml of e-cigarette liquid, the state should have received about UAH 450 in excise tax. However, if a 'self-mixing' liquid kit is sold, then the budget receives at most only the excise tax from the nicotine booster (from 3 ml – 10% of the volume of the finished liquid), that is, UAH 45," the Growford Institute explains the scheme for "saving" on excise tax.
Therefore, it is not surprising that currently about 50% of the entire market of e-cigarette liquids sold in Ukraine consists of "self-mixing" kits.
To effectively combat the illegal vape market, the Growford Institute proposes also considering possible legislative changes, which, in particular, provide for the possibility of a significant increase in fines for retail sale and free distribution of nicotine and other components of e-cigarette liquids – to at least UAH 250,000. After all, the current fines have no effect at all on retail sales: the whole point is that the retail sale of prohibited vapes and liquids for them is so profitable that even being held liable and paying a fine of UAH 25,000 is not capable of influencing the state of implementation of the legislative ban.
Yes, according to estimates by Growford Institute analysts, a vape kiosk in a shopping center is capable of generating from 10 to 15 thousand hryvnias in revenue in just one day. That is why any raids and seizures of prohibited products with the imposition of a fine of UAH 25,000 lead to a temporary suspension of operations for several days, and in some cases only to a reduction in assortment. Thus, a significant increase in the size of fines could positively influence the practice of holding violators liable and increase the effectiveness of tax authorities' actions.
Analysts called for strengthening coordination and cooperation among law enforcement and regulatory bodies in the fight against the illegal e-cigarette market, as well as analytical work – in particular, to track supply chains of raw materials and equipment for the production of liquids. The processing of vape retail networks should take place on a regular basis.
They propose also involving local self-government bodies and postal operators (which are often used to deliver illegal products) in the cooperation.
Experts advise legislatively banning the retail sale or gifting of propylene glycol, food flavorings, and glycerin (these are the main components for "self-mixes") at points of sale of electronic cigarettes, as well as tracking and stopping schemes of business fragmentation to circumvent legislative bans – when several sole proprietorships operate at one retail outlet, through which the sale of different parts of the "self-mix" is formalized.
The Growford Institute also considers it expedient to ban the issuance of licenses for retail sale of excisable goods to business entities that were deprived of licenses earlier, and to persons connected with offenders, as well as to provide for liability for landlords who continue to provide retail space for lease to such offenders.