“According to preliminary reports, in the nine months of 2001 over UAH 3.2 billion has been appropriated [by tax inspectors] to the budget from the shadow sector,” First Deputy Director of the State Tax Administration of Ukraine Viktor Zhvaliuk told journalists on October 1. In the same period, the tax police has filed more than 7000 criminal charges against tax evaders, with 78.6% of the cases involving gross tax evasion. The tax police also seized UAH 140 million worth of illegal goods, closed down 742 underground workshops turning out consumer goods, including 278 bootlegging distilleries, suspended operations of 3627 bogus companies, found over 13,300 tons of untaxed grain, and re-imported about $45 million from abroad, inter alia.
Despite all these measures by the STA, the tax crime rate is not declining in Ukraine. According to Mr. Zhvaliuk, the share of the shadow economy in the total GDP is 40%. Moreover, it turned out that tax dodgers are increasingly trying to legalize their profits using various techniques to sidestep the eternally vigilant STA.
“In order to put a more effective brake against tax evasion, Verkhovna Rada should urgently pass the bill On Preventing and Fighting the Legalization of Illegal Profits,” Zhvaliuk continued. Incidentally, one of the forty recommendations to Ukraine made by FATF , a world organization fighting the laundering of illegal profits, stresses the need to enact this law. Under the law, banks and other financial institutions will be obliged to supply information on dubious transactions to a central executive agency.
It looks likely that in Ukraine none other than our glorious STA will be precisely this agency, something quite natural in Zhvaiuk’s opinion, “For,” as he put it, “over 80% of illegal profits is earned by tax evasion.” In other words, the mighty agency, whose head double-dips as chief customs official and chairman of a political party, will also be able to control cash flow transactions blacklisted as dubious by some 35 available STA documents.
Meanwhile, the term “dubious financial resources,” which stands for profits hidden by Ukrainian businessmen from the sultry sun of the tax laws, is dubious itself. “In most FAFT member states such profits are earned from trafficking drugs, immigrants, arms, gambling, etc.,” Director of the STA Department to Combat the Laundering of Illegal Profits Oleksandr Bondarchuk admitted. In our case, dubious profits are caused by the unwillingness (perhaps the impossibility) for our businessmen to comply with ever-changing and controversial tax legislation.
Mr. Zhvaliuk assured that passage of the bill will not in any way run counter to the tax liberalization policy proclaimed by STA chief Mykola Azarov as part of his political party agenda. “We will fight tax evaders,” he warned. Interestingly, the bill does not impose specific ceilings for criminal liability which means that criminal charges entailing 12-year imprisonment under Article 209 of the new Criminal Code can be pressed regardless of the sum of unpaid taxes, Viktor Zhvaliuk told The Day, just for an attempt to legalize illegally received (or illegally earned — Ed.) money.
