The electronic cigarette market is increasingly becoming a subject of media attention. VARES views this interest positively, as it provides an opportunity to speak openly about the actual state of the industry and the challenges it faces.

Recently, VARES received an inquiry from *Business Censor* regarding the activities of Association members. At the same time, some of the questions raised indicate a misunderstanding of the role of an industry association itself.

An industry association is neither a commercial entity nor an analytical department of its members. It does not manage the businesses of its members and is not the custodian of their commercial information.

An industry association should be approached for information concerning the market as a whole: its current state, systemic problems, identified regulatory gaps, and the industry’s position on possible ways to address them. The Association collects and analyses available market data and assesses how particular regulatory decisions affect the legal market, the competitive environment, and state budget revenues. These are precisely the issues VARES works on.

And there is an important context here.

While journalists are attempting to count counterparties, packaging volumes, and the business indicators of legal companies, **93.6% of the market, according to Kantar, continues to operate in the shadow economy**, without proper taxation of the actual volume of sales. In our view, the question of why the state is not receiving taxes from this part of the market is of the greatest public interest.

A journalistic inquiry can be sent to a legal business: it has a name, licences, pays taxes, and is visible to the state. Unfortunately, sending a similar inquiry to participants in the shadow market is considerably more difficult.

That is why we decided to publish the inquiry we received and VARES’s responses in full and without any abridgement.

1. Question from *Business Censor*

“Please provide information on the business entities to which VARES members holding wholesale licences for liquids sell goods/products, as well as the volumes of products sold in 2025 and during the first six months of 2026.”

VARES Response

Information on counterparties, sales volumes, and sales structures constitutes commercial information of individual business entities that are members of VARES. The Association does not possess such information broken down by individual members and does not collect it, as the requested information is unrelated to the Association’s core activities.

Moreover, a request for lists of counterparties and sales volumes resembles research into the commercial structure of the market and the competitive environment far more than a request for information about the activities of an industry association.

VARES does not provide competitive-market research services and does not compile databases of its members’ counterparties at the request of third parties. This therefore raises a legitimate question: **for whom, and for what purpose, is this commercial information being collected?**

If the editorial team requires research into the market structure, its participants, counterparties, and sales volumes, we recommend contacting specialised consulting companies. These companies professionally collect and analyse this type of commercial information on a paid basis.

2. Question from *Business Censor*

“Please provide information on the volumes of production/import of liquids for electronic cigarettes and the amounts of excise tax paid, broken down by each business entity that is a VARES member, for 2025 and the first six months of 2026.”

VARES Response

Information regarding production volumes, imports, and taxes paid by specific business entities relates to the business activities of the respective companies.

The Association may receive and use certain data from its members to compile aggregated market analytics. However, this does not make VARES the owner of the commercial or tax information of individual companies, nor does it give the Association the right to disclose such information on an entity-by-entity basis.

At the same time, the information requested may be verified by the editorial team using official government data. The **State Tax Service of Ukraine** holds information on declared production volumes of excisable goods and the amounts of excise tax paid.

Therefore, to obtain official data broken down by business entity, we recommend that the editorial team contact the State Tax Service of Ukraine directly. In our view, information obtained from a government authority is the appropriate independent source for verifying such indicators in a journalistic publication.

3. Question from *Business Censor*

“Please provide information on the volumes of production/import of food flavourings and other goods containing food flavourings, glycerine, propylene glycol, as well as the amounts of excise tax paid on such goods/products, broken down by each business entity that is a VARES member, for 2025 and the first six months of 2026.”

VARES Response

Information regarding production and import volumes broken down by individual business entities relates to the business activities of the respective companies. VARES does not collect such information because it is not directly related to the Association’s core activities.

Therefore, regardless of the content or level of detail of this request, the Association cannot provide the requested commercial data broken down by individual members.

We would also draw attention to the fact that, even if this were treated as an information request addressed to the appropriate information holder, the question is formulated so broadly and ambiguously that its subject matter cannot be clearly determined.

Does the request concern production or import? These are different business operations and involve different datasets.

What exactly is meant by “other goods”? Which specific goods or tariff categories are of interest to the editorial team?

Does the request concern goods that simultaneously contain food flavourings, glycerine, and propylene glycol, or any goods containing at least one of these components?

The request regarding the “amounts of excise tax paid on such goods/products” is also unclear. The mere presence of food flavourings, glycerine, or propylene glycol in a product does not in itself mean that the product is subject to excise tax. The list of excisable goods is clearly defined by **Article 215 of the Tax Code of Ukraine.

Therefore, if the editorial team intends to investigate these indicators, it must first clearly define the specific goods, transactions, and taxes that are the subject of the research, and then contact the appropriate holders of official information.

For imports, this is the State Customs Service of Ukraine. For production and taxation of excisable products, this is the State Tax Service of Ukraine.

This, however, does not change VARES’s position: the Association is not authorised to disclose its members’ commercial information on an individual entity basis.

4. Question from *Business Censor*

“Please also provide information regarding the volume(s) of containers/packaging into which excisable products — liquids for electronic cigarettes — are packaged/bottled.”

VARES Response

VARES does not maintain records of its members’ product ranges broken down by packaging volume and does not collect this information for subsequent disclosure to third parties.

In practical terms, in order to answer this question, the Association would have to separately collect and consolidate information regarding the product assortment and product characteristics of individual business entities.

This is the subject of market research, rather than information concerning the activities of an industry association.

VARES does not provide marketing analysis services and does not conduct product-range research on market participants at the request of third parties.

If the editorial team requires research into the products available on the market, their characteristics, types, and packaging volumes, we recommend contacting specialised research or consulting companies that professionally conduct such studies on a paid basis.

5. Question from *Business Censor*

“Please also provide the text of the legislative amendments intended to eliminate regulatory gaps and ensure proper accounting of nicotine-containing products.”

VARES Response

VARES is an industry association and is not an entity vested with the right of legislative initiative,

The Association’s role is to identify systemic market problems, formulate the position of legal businesses, and contribute to the development and improvement of Ukraine’s regulatory framework governing the electronic cigarette and e-liquid industry.

Drafting and registering legislation is carried out by entities vested with the right of legislative initiative, in accordance with the procedure established by law.

Therefore, VARES cannot provide the editorial team with the “text of legislative amendments” as its own draft law.

At the same time, the Association’s position regarding the necessary changes is public.

VARES proposes:

1. Improve the sector-specific legislation.

The circulation of liquids used in electronic cigarettes and related excisable goods should be comprehensively regulated.

Clarifying the terminology and relevant product categories should eliminate opportunities for the substitution or misclassification of products at the point of sale, ensure transparent taxation, and clearly distinguish legal circulation from illegal activity.

2. Establish statutory requirements for nicotine boosters.

Taking into account the specifics of the current market model, where the most common format is a total volume of 30 ml of ready-to-use product, VARES proposes limiting the volume of a nicotine booster to 5 ml, with a nicotine concentration of no more than 120 mg/ml.

This would allow the final product to comply with European legislative requirements regarding the maximum permitted nicotine content.

3. Prohibit the storage of nicotine at retail locations.

A prohibition should be introduced on storing nicotine classified under UKTZED commodity heading 2939 at retail locations selling liquids for electronic cigarettes.

For violations, VARES proposes a fine equal to 200% of the value of the products, but not less than UAH 170,000.

4. Separate retail licences.

Retail licences for liquids used in electronic cigarettes should be separated from retail licences for tobacco products.

This would enable the state to establish a transparent and clearly identifiable group of business entities that actually sell liquids for electronic cigarettes.

What would this model achieve?

The objective of the proposed model is to make the legal market protected and competitive, while making the illegal market as vulnerable and economically risky as possible.

For legal businesses, this would include bringing the price affordability index closer to a fair European level.

The price affordability index shows what proportion of a consumer’s income is spent on a product. In other words, it makes it possible to compare the actual affordability of products in Ukraine and European countries not only by nominal price, but also by taking into account differences in income levels.

Today, it is precisely the imbalance in price affordability that creates a significant competitive advantage for the shadow segment.

The model proposed by VARES is intended to reduce this gap and give legal products a genuine opportunity to compete with illegal products on price.

**Slide: Comparison of the Price Affordability Index in Ukraine and European Countries:**
[Google Document](https://docs.google.com/document/d/196xQUvO8xK_DgAdc3pyYz16EkWXZlHrLs_963HzJR28/edit?hl=uk&tab=t.0)

At the same time, clear and predictable legislation would allow legal companies to develop long-term strategies, invest, and operate under understandable and stable rules.

For the state, the proposed model would mean a straightforward system of control: a clearly defined product, an identifiable group of sellers, and clear inspection criteria.

Regulatory and law-enforcement authorities would be able to distinguish a legal market participant from a violator significantly faster.

For the illegal market, the situation should be the opposite.

Closing regulatory gaps would significantly reduce opportunities to operate in the shadow economy and would make violations subject to substantial financial risks and, in cases provided for by law, criminal liability risks.

At the same time, legal businesses and the state would have a shared interest: bringing the market out of the shadows, combating illegal circulation, and increasing revenues to the state budget.

The logic of the proposed model is straightforward:

Operating legally should be clear, predictable, and economically viable. Operating in the shadow market should be difficult, costly, and risky.