Ukrainian Oil and Gas Association and Ukrainian Business Council Collaborate with Authorities to Tackle Shadow Fuel Market and Combat Smuggling in Ukraine
The Ukrainian Oil and Gas Association (UOGA), together with the Ukrainian Business Council (URB), held a meeting with the leadership of the Verkhovna Rada Committee on Finance, Tax, and Customs Policy, as well as representatives from the Bureau of Economic Security (BEB), the State Tax Service (DPS), the State Customs Service, the National Police, and other experts during the conference “How to De-shadow Retail Trade and Minimize Smuggling in Ukraine?”. The participants discussed crucial issues related to combating illegal business, smuggling, and tax evasion, which have a significant impact on the competitiveness of legitimate businesses and the Ukrainian economy.
In his speech, Yaroslav Starovoitenko, President of the Ukrainian Oil and Gas Association (UOGA), highlighted positive changes in the fuel market. “A few years ago, the number of illegal gas stations in Ukraine was about 1,500, but today this figure has dropped to 300-400 sites, which show signs of violations of urban planning and/or fiscal legislation. This progress was made possible thanks to the joint work of the Temporary Investigative Commission, the State Tax Service, law enforcement agencies, and the Ukrainian Oil and Gas Association. However, despite the reduction in the number of such sites, it is crucial to keep the situation under strict control as the problem is not fully resolved: independent experts continue to find illegal gas stations where gasoline with a high sulfur content, a sign of illegal mini-refineries, is being sold,” explained the UOGA President.
Regarding illegal fuel production, at the beginning of 2023, about 20 facilities equipped for fuel production were discovered. This list was handed over to the Temporary Investigative Commission, tax authorities, and law enforcement agencies. Some of these illegal mini refineries were shut down by law enforcement and tax authorities, while others were destroyed during attacks by the aggressor.
However, independent fuel quality experts occasionally detect gasoline with sulfur content far exceeding permissible limits in small networks and illegal gas stations, indicating the ongoing operation of illegal mini refineries.
The UOGA President emphasized, “A crucial step in combating illegal fuel production will be the adoption of bill No. 10215, which will allow the State Tax Service to monitor the movement of gas condensate—a raw material often used in illegal production.”
Another key topic of discussion was the manipulation at semi-legal gas stations, where VAT evasion, underreporting of profits, and payment of salaries under the table were observed. Yaroslav Starovoitenko noted that the Ukrainian Oil and Gas Association, together with the State Tax Service, is working on legislative initiatives aimed at addressing these issues. Conference participants agreed that further efforts in this direction are necessary, and new approaches to tackling tax fraud should be developed.
During the conference, other expert opinions and initiatives aimed at de-shadowing the economy were also presented. In particular, representatives of business and government agencies discussed issues related to the excise goods market, such as tobacco products, alcohol, and fuel. According to participants, the efforts of government agencies have led to a decrease in the level of illegal trade in excise goods, but there is still much work to be done. It was noted that bills No. 6490-d and No. 10380 could contribute to the overhaul of the State Customs and Tax Services, improving their performance and ensuring greater transparency in management.
During the discussion, representatives of the State Tax Service also shared their success in de-shadowing the market, highlighting positive results in tax collection. For example, compared to 2021, state budget revenues increased by 69.7%, which is an important step toward creating fair conditions for law-abiding businesses.
In conclusion, the participants agreed on the need for continued close cooperation between businesses and the state to combat the shadow economy. Several concrete steps were proposed, including public analytics of revenues through cash registers, introducing economic incentives for consumers of excise goods, and granting local governments access to information about businesses dealing with excise goods.
The Ukrainian Oil and Gas Association expresses its gratitude to the leadership of the Verkhovna Rada Committee on Finance, Tax, and Customs Policy for a productive meeting and open dialogue, which contribute to effectively addressing the pressing issues of the fuel market in Ukraine.
