The shadow market for vapes in Ukraine exists not because the state is unaware of it. It exists because the state has yet to decide what it is — a legal business or a crime.
Director of the Bureau of Economic Security Vadym Tsivinsky publicly acknowledged the stalemate: the BES cannot effectively combat illegal circulation of electronic cigarettes as long as the status of this market remains blurred. According to him, the only way out is either clear legalization with excise taxes and licensing, or direct criminalization of production and sales.
What is happening in the market now
Electronic cigarettes are formally not banned, but also not fully regulated. This means: you can sell, but no one has set the rules of the game. As a result — mass imports without customs processing, sales without excise stamps, zero budget revenues.
According to various estimates, the share of illegal vapes on the Ukrainian market reaches 80–90%. This is not a marginal phenomenon — it is essentially the industry norm.
Why the BES cannot simply "shut down" the scheme
The problem is structural. When there is no clear law, there is no clear violation either. Law enforcement can record individual instances of excise tax evasion, but to systematically dismantle the market without a legislative framework is legally difficult and procedurally vulnerable.
Tsivinsky essentially passed the ball to parliament and the Cabinet of Ministers: the BES can enforce the law, but cannot replace it.
Two options — and both are painful
Legalization means excise taxes, licenses, labeling — and an automatic conflict with those who currently profit from duty-free imports. Shadow market players have the resources and motivation to slow down any regulation.
Criminalization is a tougher path, but it also does not guarantee results. Bans on tobacco products in various countries have consistently failed: demand does not disappear, it goes deeper underground.
Between these options is the current status quo, which benefits smuggling distributors and is disadvantageous to everyone else: neither the budget, nor consumers, nor legitimate business.
The scale of losses
Exact figures for excise tax shortfalls on vapes are not publicly available — which is telling in itself. For comparison: the illegal market for regular cigarettes costs the budget an estimated several billion hryvnias annually, according to analysts. The vape market is younger but growing faster.
If parliament adopts regulation this year — will the BES have the tools and political will to actually force the market to operate under new rules, rather than simply add another law that goes unenforced?
