On behalf of VARES, a professional association representing the electronic cigarette industry, we would like to thank the media outlet and the author for their attention to and interest in our market. We would also like to share some additional perspectives on the conclusions presented in the article.

### The illicit market accounts for more than 90%

According to Kantar research, 93% of Ukraine's electronic cigarette market operates in the shadow economy. Growford Institute estimates that the illicit market share will reach 95.8% in 2026. This means that the legal segment accounts for only approximately 4–7% of the market.

Does this mean that demand for electronic cigarettes or their sales have declined?

No. According to VARES estimates, Ukraine has approximately 1.4 million electronic cigarette users, representing 6.5% of the country's estimated 22 million adults. Other studies suggest even higher figures. For example, a February 2026 survey by the Razumkov Centre estimated that 14.6% of Ukrainian adults use electronic cigarettes.

At least 1.2 million litres of e-liquid are consumed in Ukraine annually.

This demand is supported by widespread product availability. Ukraine has developed a substantial specialised electronic cigarette retail sector, with an extensive network of physical stores.

Business Censor also highlights the open availability of these products in its article, noting that vape shops operate with visible signage, advertising, websites and social media accounts. E-liquids and disposable electronic cigarettes, which Kantar data suggests are almost entirely illicit, are also sold in supermarkets. Despite an illicit market share exceeding 90%, these products have remained openly available for years.

### The market has not disappeared. The products have not disappeared. Tax revenues have.

Both Censor.net and VARES emphasise the enormous losses to Ukraine's state budget resulting from unpaid taxes — revenues that could and should contribute to public finances every year.

Instead, between 2023 and 2025, we observed the opposite trend: sales of separately marketed electronic cigarette components increased fortyfold, while budget revenues from the market declined more than eightfold.

In other words, market expansion was accompanied by widespread growth in illicit activity and a significant reduction in tax contributions.

The estimated amount of foregone tax revenue depends on the methodology used.

In its article, Censor.net refers to research by Growford Institute. According to the institute's calculations, the theoretical potential for budget revenues in 2026 amounts to at least UAH 18.7 billion.

VARES uses a different approach based on its proposed fiscal model, the "Nicotine Booster Excise Tax." Under this model, the realistic annual fiscal potential is estimated at UAH 4 billion.

Methodologies may be debated, but one fact is indisputable: in 2025, Ukraine's state budget collected only UAH 83 million in excise duties on e-liquids.

That is 48 times less than the potential revenue estimated under VARES' considerably more conservative and realistic calculations.

### Can the situation be reversed and the market brought out of the shadows?

### Law enforcement and the judiciary

The authors of the article emphasise the need to improve law enforcement effectiveness, particularly in combating the illicit trade in e-liquids.

They highlight the importance of stronger coordination between the Economic Security Bureau of Ukraine, the National Police and the judicial system.

Only a court ruling can establish criminal liability. However, according to the article, no actual prison sentences have been imposed in the relevant cases to date. The publication refers to criminal proceedings registered by the Economic Security Bureau in the Unified Register of Pre-Trial Investigations since the beginning of 2026.

VARES fully agrees that strengthening law enforcement and judicial effectiveness is essential.

### Regulatory restrictions

At the same time, the authors are less convinced that changes to regulatory restrictions alone would be effective.

Citing Tetiana Koshchuk, a taxation expert at Growford Institute, Censor.net argues that lifting the ban on non-tobacco-flavoured e-liquids would not automatically bring the market into the legal economy.

Indeed, during the first half of 2023, before the flavour ban came into force, the illicit share of Ukraine's e-liquid market had already reached 76%.

Ms Koshchuk is correct on this point.

VARES closely monitors and analyses the impact of sudden and stringent regulatory restrictions on illicit market dynamics across several EU countries.

Our observations indicate that abrupt regulatory changes often leave businesses insufficient time to adapt their business models. As the profitability of legal operations declines sharply, businesses face increasing incentives to move into the shadow economy.

This is precisely the scenario that unfolded in Ukraine's electronic cigarette market between 2023 and 2025.

At VARES, we are convinced — a view shared by our colleagues in European and British industry associations — that the only realistic path towards reducing the illicit market is to create conditions under which legal business operations are profitable, while illegal activities become too costly and unpredictable.

To achieve this, VARES proposes introducing a fiscal framework we call the "Nicotine Booster Excise Tax."

Under this approach, nicotine boosters would be recognised as a separate nicotine-containing excisable product sold in consumer packaging. Such classification is compatible with the EU customs classification framework.

The estimated annual fiscal potential is UAH 4 billion — comparable to the annual tax contributions of major international businesses operating in Ukraine, such as a large fast-food restaurant chain or one of the country's leading mobile network operators.

To put this into perspective, that is 48 times the amount currently collected by the state budget from e-liquid excise duties.