Without a Shadow of a Doubt

01.07.2009

Without a Shadow of a Doubt

In summer 2008 duty stamps of a new pattern with a more sophisticated degree of protection were introduced in Ukraine. Given that and despite the total slump in 2009 output, the official volume of the most popular “grey market” product – vodka – is still growing Certification

According to information reported in Our Product (#1, 2009, pp.46-51), the production of tobacco and spirits with counterfeit duty stamps was running up to the middle of 2008, launched by far from socially responsible manufacturers of tobacco and alcoholic beverages.

The situation changed in summer 2008. On May 21 the government issued Resolution #486 On Adoption of New Patterns of Duty Stamps for Alcoholic Beverages and Tobacco Goods of Domestic and Imported Production and Entering Alterations in Some Resolutions of the Cabinet of Ministers of Ukraine.

Our Product was informed that the scientists of the National Academy of Sciences and the Specialized Enterprise HOLOGRAPHY, a member of the EDAPS Consortium, participated in the development of duty stamps with security features of a new quality. The uniqueness of the development lies in holographic security elements made by HOLOGRAPHY and applied on the stamps as a security feature, having special hidden marks (the stamps themselves are produced by the state enterprise Print Works Ukraine of the Ministry of Finance). The availability of hidden marks allows any inspector with the help of a small device the size of a marker to check the authenticity of duty stamps in any food store in a few seconds. The unique device, Spectrometer, was also devised by the HOLOGRAPHY specialists.

The initiative of the Cabinet of Ministries of Ukraine brought in an instant economic effect. As reported by Our Product (see #1 dated 2009, pp.46-51), based upon the data of the State Tax Administration of Ukraine for 2008, the payment of excise duty on tobacco and alcohol to the budget amounted to 8.1 bln UAH, that is 1.65 bln UAH or 26% more than in 2007. This total is without VAT and income tax.

The Stamp holds the line

Unfortunately, the current economic crisis has had a negative impact on the Ukrainian economy, thus the year 2009 showed a reduction in output volume. It affected, for example, alcoholic beverage output. Upon the State Tax Administration of Ukraine (STAU) in the first quarter 2009 the volume of spirits production was 17.35 mln dal, that is 15.6% less than the first quarter of 2008.

This resulted in a change in the volume of duty stamps output. Based upon the data of the Ministry of Finance, during the first six months purchase orders were reduced by 14.9%. According to the results for May-June 2009 and despite the general recession in the economy, the volume of duty stamps output grew. The registered increase was up 11.3% as compared to May-June 2008 (when there was no question of the crisis).

This phenomenon is explained very simply. According to the STAU’s statistical data for January-March 2009, vodka production (unlike brandy, wine, liqueur, etc.), increased; the growth was about 16% as compared to the first quarter of 2008.

The fact is that vodka production, which more often than not is faked, is moving out of the so-called grey market, owing to the high level of protection of duty stamps. In addition, the duty stamps of the new pattern contain updated requisites, which indicate the differentiated rate of excise duty depending on the strength of alcohol, which is denominated in degrees. Thus most “folk product” was properly marked. Due to the introduction of new duty stamps, the output volume of alcoholic beverages with a spirit concentration of 25% was reduced 9 times in September-December 2008 (see #1 dated 2009, pp.46-51).

Certainly, the enforcement actions helped to speedily move the “forty-degree vodka” out of the grey market. Based upon the STAU for the first quarter of 2009, the officers of the tax service withdrew from illegal sale 248.1 ths dal of alcohol beverages in the amount of 5.6 mln UAH. In total about 263 crimes of illicit production, storage, sales or transportation for the purpose of selling excisable goods were exposed. The activity of 117 illegal alcohol productions was ceased.

Upon the STAU in May 2009 the receipts to the budget from payments of excise duty on alcohol and tobacco amounted to 1105.6 mln UAH. The increase was about double as compared to May 2008 (the payments then equaled 584 mln UAH).

Text: Anna Levkovskaya

Source: Magazine "Our Product" No 2(2009)