Effects of the legislative change to the tobacco excise tax in Ukraine

This study assesses Ukraine’s 2025 reform of tobacco excise taxation and evaluates its effects on public finances, consumer behaviour and the illicit tobacco market. The shift from fixed hryvnia-based rates to euro-denominated excises aimed to stabilise revenues, support EU alignment, and curb smoking by reducing affordability. Findings indicate strong revenue growth in early 2025 and a continued but gradual decline in illicit trade, which remains sustained by weak enforcement and high profitability. Overall smoking prevalence is not declining – and is even gaining in popularity among women and youth – partly due to the availability of cheaper illicit products and lower-taxed heated tobacco products. The study concludes that further progress requires harmonising taxation across all product categories, strengthening enforcement and monitoring systems (e.g. ‘Track&Trace’), and expanding public-awareness and prevention efforts to reduce smoking.

Keywords: Smoking, tobacco consumption, excise revenues, illegal market, tax advantage

JEL classification: H20, I18, D12

Countries covered: Ukraine

The study was first published as a Centre for Economic Strategy Policy Paper.