55% of alcohol production in Ukraine is in the shadow today, and state-owned distilleries have been controlled by criminal groups for over 10 years, President Volodymyr Zelenskyy said in a meeting on the development of the Ukrainian alcohol industry during a working trip to the Ternopil region. Currently, only four of the eleven distilleries operate in the region.
The President cited the example that today the so-called Tetra Pak of 10 liters of wheat vodka could be freely purchased online at the price of 370 UAH.
“That means a bottle will cost somewhere between 15-18 hryvnias. And we buy in the store for 90-100 hryvnias. There are shadow businesses. But how do they work, who covers them?” Volodymyr Zelenskyy noted.
Deputy Head of the Office of the President Yuliya Kovaliv noted that since 2016 the financial result of the state-owned enterprise Ukrspirt had decreased by almost five times. According to her, in 2016, the profit of the enterprise was about 97 million UAH, and today it has decreased almost to zero. Hence, the situation with the payment of taxes is also critical: three years ago, the monopolist Ukrspirt paid to the budget almost 30 million UAH of income tax, last year, it paid nothing at all.
“Due to the illegal alcohol market, the state and local budgets lose 8 billion hryvnias annually. And these are the problems with the payment of wages, the construction of roads, the development of infrastructure,” Yuliya Kovaliv stressed.
Minister of Economic Development, Trade and Agriculture of Ukraine Tymofiy Mylovanov noted that over the last 10 years the production of legal food alcohol had decreased fourfold – due to the illegal alcohol market. If the current situation in the alcohol sector is maintained, excise tax losses can reach UAH 8-10 billion.
“The situation can be changed through demonopolization, deshadowing and privatization of the alcohol sector,” Tymofiy Mylovanov emphasized.
The President and the Government will not put up with the shadow alcohol market and jointly work over its liquidation.
Volodymyr Zelenskyy has already submitted a bill liberalizing the activity in the field of ethanol production.
This document provides for a licensing mechanism and the production of alcohol only with a license starting from 2020.
“We are eliminating the foundation for the existence of this corrupt criminal system. And if the producer is caught producing “illegal” alcohol, he will be deprived of the license and the right to produce alcohol for at least five years. I think this is fair. There can be no other way. We are ready for this. The government is getting ready. Fair competition, fair licenses,” the President of Ukraine said.
The presidential bill envisages four steps: abolishing the state monopoly on alcohol production from January 1, 2020, abolishing restrictions on the construction of distilleries and privatization of the existing ones, licensing the production and wholesale of alcohol, limiting the import of alcohol until January 1, 2022.