The Naftohaz Ukrayiny National Joint Stock Company (do not let the name fool you: the state owns it, but it takes stock in “private” companies; could we call this de-privatization?) intends to restore its impact on regional gas-supply facilities (obl-, misk,- and rayhaz), in other words, to resume control over a structure that collects money for the natural and liquefied gas utilized by the populace and enterprises, Vladyslav Tarashevsky, a Naftohaz Ukrayiny director, told journalists on May 18.
According to him, the company is going to try to achieve greater participation in these regional enterprises’ authorized capital by taking over their shares as payment of debts they owe it. Naftohaz Ukrayiny is taking these measures to improve manageability of the regional gas supplying enterprises as part of its efforts to set up Haz Ukrayiny, a new subsidiary.
Are these measures sort of an answer to the criminal case over intentional tax evasion by Naftohaz Ukrayiny executives? According to Major General Oleksandr Spyrydonov, first deputy chief of Ukraine’s tax police, these criminal proceedings were instituted in late March 2001, following a comprehensive audit of the firm. In his words, “the audit was not accidental.” It is irregularities in the company’s divisions that drew a closer attention of tax police to Naftohaz Ukrayiny, the general pointed out. What put tax policemen on their guard was the surplus of gas in the underground reservoirs of Lviv oblast and the fact that considerable funds equal to the value of this surplus were written off as commercial losses of fuel. The unrecorded gas was delivered to a number of power generating and supply companies.
These offenses, Mr. Spyrydonov said, were the reason why Naftohaz Ukrayiny was subjected to a more detailed comprehensive audit in 2000. The audit discovered that UAH 823 million were not assessed and paid as profit tax from 1998 to 2000 because the total profit tax worth UAH 2.6 billion had been underrated. In addition, the VAT was also underrated by UAH 147 million by means of an unfounded raise of the tax credit. The budget lost a total of over UAH 5 billion, fines included. However, Mr. Spyrydonov believes, an indictment will be handed down in respect of a smaller tax-evasion amount. Preliminary investigation revealed, the general maintains, that Naftohaz Ukrayiny executives have evaded paying a total UAH 1.9 billion taxes in 1998- 2000 by concealing the objects of taxation. Naftohaz Ukrayiny top executives were interrogated by tax police and tax administration investigators.
As the general told The Day, his office is now conducting active investigative and procedural actions, surveillance, and scrutiny of documents as part of the case, but the enterprise experts “disagree with some of our conclusions and will perhaps be able to defend some of their positions, although we also have 100%-proven facts which will form the basis of indictments.” Mr. Spyrydonov noted that tax payment improved substantially after the firm became headed by Vadym Kopylov, a former tax administration executive. Although no tax-evasion facts were found with respect to 2000, “there is still some shortage.” Mr. Spyrydonov also did not rule out that the investigative department may seek an interview with former CEO, People’s Deputy Ihor Bakai, Interfax-Ukraine reports. “If a person put his signatures and bore responsibility as manager, he must, naturally, testify in the case,” Mr. Spyrydonov noted.
Meanwhile, the idea of Naftohaz Ukrayiny privatization has again been recently resuscitated. The company’s current management thinks it advisable to effect privatization by enacting the law of Ukraine On the Special Features of Naftohaz Ukrayiny Privatization, Mr. Tarashevsky announced at the meeting of the interdepartmental fuel and energy privatization control task force. In his opinion, privatizing the entity after it adopts the concept of a unitary share (an integral proprietary unit) would be the best option. “In this case Naftohaz shareholders will not receive the right to own the companies forming its corporate structure,” he noted, adding that this method of privatization proceeds from the firm’s strategic importance to the economy and state security.
This is indisputable. It is the firm’s strategic importance that stirs up a keen interest in its privatization. The current Ukrainian law prohibits privatizing gas transport systems which make up a sizable share of Naftohaz Ukrayiny’s value. Nevertheless, Verkhovna Rada will consider a bill providing for privatization of Ukraine’s gas supply system. With this country’s economic situation (and the foreign political realities) in view, this problem will have to be addressed one way or another. But it is without a shadow of a doubt that the more scandals and disclosures about the monopolist being privatized (in this year’s first quarter alone, tax police investigators dealt with 150 criminal cases involving tax offenses in the oil and gas complex) and the more talks and rumors about its bankruptcy, the smaller amount will come to the state’s pocket as a result of privatization.
