Ukraine wants to introduce total digital control over tobacco raw materials: 24-hour video surveillance, GPS monitoring, and remote access to the State Tax Service and the Federal Anti-Corruption Bureau

In Ukraine, state control over the production, storage and transportation of tobacco raw materials may be significantly strengthened. The relevant changes are provided for in the draft law No. 15372 “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Improving the Efficiency of Control over the Production and Circulation of Tobacco Raw Materials”.

The document proposes to create a comprehensive digital control system that will include round-the-clock video surveillance, remote access of regulatory authorities to video materials, GPS monitoring of transportation, automatic recognition of vehicle license plates and electronic control of all operations with tobacco raw materials.

Round-the-clock video surveillance will become mandatory

One of the key innovations of the draft law is the amendment to the Law of Ukraine “On State Regulation of the Production and Circulation of Ethyl Alcohol, Alcohol Distillates, Bioethanol, Alcoholic Beverages, Tobacco Products, Liquids Used in Electronic Cigarettes, and Fuel”.

The document proposes to establish an obligation for business entities engaged in tobacco cultivation, production, fermentation or storage of tobacco raw materials to equip their facilities with:

a control and access system;
a 24-hour video surveillance system;
means of continuous video recording of all operations with raw materials.

The system must operate continuously and cover all places of storage and movement of tobacco products.

The video archive will be stored for at least 30 days

The draft law defines the minimum technical requirements for video surveillance systems.

In particular, they must provide:

continuous video recording;
storing the archive of records for at least 30 calendar days;
the possibility of online viewing;
access to archival materials;
copying records to electronic media.

Even stricter requirements are provided for individual excise warehouses – the minimum memory capacity of the video surveillance system must be at least 40 terabytes.

The State Tax Service and the BEB will receive remote access to cameras

The bill significantly expands the powers of regulatory authorities.

Officials of the State Tax Service will be able to remotely view:

online broadcasts from cameras;
archived video recordings;
multimedia information from video surveillance systems.

Separate remote access to video materials is also provided for the Bureau of Economic Security of Ukraine.

The procedure for such access must be determined by the Ministry of Finance of Ukraine.

If the cameras do not work, the movement of products will be prohibited

One of the most stringent provisions of the bill is the actual blocking of the operation of the enterprise in the event of a malfunction of the control systems.

The document stipulates that if the video surveillance system stops functioning, the enterprise will be prohibited from:

importing tobacco raw materials;
exporting products;
carrying out any movement of goods until the system is fully restored.

In certain cases, resumption of work will be possible only after notification of the tax authority, and certain operations will be carried out in the presence of its representative.

Control will also extend to transport

In addition to video surveillance cameras, enterprises will have to equip checkpoints with modern technical means.

In particular, the system should include:

automatic barriers;

electronic weighing complexes;

automatic license plate recognition system;

automatic recording of the date, time, weight of the vehicle and its state registration number.

All information must be stored for at least one year without the possibility of its change or deletion.

If the automatic license plate recognition system or weighing complex fails, the import and export of tobacco raw materials will also be prohibited until the malfunctions are eliminated.

Transportation will be controlled in real time

The draft law also provides for the creation of a remote monitoring system for tobacco raw materials transportation.

To do this, vehicles must be equipped with GPS or other navigation devices that will transmit information about the vehicle’s location to the state information system in real time.

It is proposed to prohibit the transportation of tobacco raw materials without connecting to such a system.

Why are such changes proposed

The authors of the bill explain the need for increased control by the rapid growth of the illegal tobacco market.

According to the data provided in the explanatory note:

the share of illegal tobacco products in Ukraine has reached 19.8%;

annual losses to the state budget due to non-payment of taxes are estimated at UAH 33.3 billion;

38% of counterfeit products are cigarettes of Ukrainian manufacturers with counterfeit excise stamps;

68% of illegal products are sold in only seven regions of the country;

about two-thirds of illegal cigarettes are sold through kiosks and shops.

According to the initiators of the bill, it is precisely the strengthening of control at the stage of production and circulation of tobacco raw materials that will allow to significantly reduce the scale of the illegal market.

What will change for business

If the bill No. 15372 is adopted, enterprises operating