In Ukraine, a significant reduction of the shadow fuel market has been recorded

In Ukraine, a significant reduction of the shadow fuel market was recorded - by almost 50%. This significant decrease in the market is not related to new government measures or changes in legislation, but to the devastating consequences of Russian shelling and military actions.

These changes were announced by Serhii Kuyun, director of the A-95 Consulting Group, during a briefing at the Ukraine Media Center. The expert noted that the main reason for the reduction of the market is the destruction of the infrastructure caused by shelling. "This is not a consequence of the work of tax authorities or changes in legislation, but the destruction of small oil refining enterprises due to military actions," Kuyun emphasized.

Before the start of the full-scale invasion of Russia, there were about 20 mini-oil refineries (mini-refineries) in Ukraine. Currently, about half of them have been destroyed, which significantly affected the production volumes. For example, one such plant in the Poltava region was completely destroyed at the beginning of June, and now this facility does not exist.

The destruction of factories and problems with the supply of raw materials led to a significant decrease in the share of production at mini-refineries. If in 2020 these plants provided 25-30% of the fuel market, now their share has decreased to less than 10%. In Ukraine at the beginning of 2020, from 24 to 30 mini-refineries were operating, located mainly in the Kharkiv and Poltava regions.

Many of these factories worked in the shadow sector of the economy, which led to the state not receiving tax revenues. According to estimates, in 2020 the state did not receive about UAH 3.7 billion due to non-compliance with tax obligations.

In addition, an important factor in the reduction of the shadow market was the reduction of the value-added tax rate on fuel. This made it unprofitable to manipulate the tax credit, the volume of which in 2021 was estimated at 10 billion hryvnias. These measures, which were implemented by the government to combat the fuel crisis, also contributed to the reduction of the shadow fuel market in Ukraine.

Thus, the reduction of the shadow fuel market in Ukraine was a consequence not only of military destruction, but also of effective government measures aimed at combating tax fraud.