Borders have always played an important role for society. Contraband, smuggled cultural relics, and drug trafficking have always been staple subjects for discussion. Nonetheless, there has been a spike in interest of late. Particularly heated discussions were caused by the clearing of gas for RosUkrEnergo, one company importing oil without paying tariffs, and problems with clearing cargoes in sea ports. Customs officials are often accused of bribery. But each story has two sides. And people do not always notice changes for the better. There will always be critics and opponents, unhappy with the border’s transparency. Yet it is necessary to put the Ukrainian border in order, and the sooner, the better.
This is not just a budgetary issue. Without clear-cut, transparent, and comprehensible customs procedures it will be hard for Ukraine to develop cooperation with Europe.
Today’s burning issues were discussed in an exclusive interview with Ihor KALIETNIK, head of the State Customs Service of Ukraine (SCSU).
Are you happy with the results of the customs’ work in 2010?
“It wasn’t an easy year, since we had to fix a totally broken customs system, burdened with too many regional subdivisions (there were up to three or four customs offices in some regions). In 2010, the customs contributed 86 billion hryvnias to the budget, in contrast to the 63 billion in 2009. Meanwhile, in the total taxes and customs duties levied in 2009, 22 percent came from charges on imported natural gas, while in 2010, this number was a mere 2.5 percent (in April the government canceled the VAT for clearing gas). Thus, the additional 21 billions hryvnias came from breaking up smuggling schemes and [ensuring] the real value of goods is delcared.
“Let us now compare the rates of growth of incoming customs duties and the rates of overall growth of import in January, 2010 and 2011. Last year in January, the total volume of all goods, imported to Ukraine, was worth 3.4 billion dollars; in 2011 it rose to 4.5 billion dollars. However, taxable imports in 2010 were worth 3.1 billion dollars, while in 2011 they constituted only 2.8 billion dollars. This happened due to the fact that today, according to Ukrainian legislation, the import of a number of goods has preferential taxation rates.
“Preferential tax rates extend to imports of natural gas, energy-saving equipment, and goods from countries with which we have free trade agreements (only in January, 2011 the total value of these preferences amounted to 2.7 billion hryvnias).
“Therefore, you should take this into account while assessing the customs’ real achievements. Without gas clearing duties (which accounted for a large proportion of customs payments in previous years), last year’s import growth amounted to 2.5 billion dollars in January, while this year’s equals 3.4 billion dollars. Thus this year’s actual increase of customs duties equals 54 percent, while the growth of taxable import reaches 40 percent. This means that imports are coming out of the shadows, and business starts playing by transparent rules.”
Which regional offices yielded most proceeds in 2010?
“The South Customs doubled its contribution (eight billion hryvnias): in April, 2010, each vessel brought in 500,000 hryvnias to the budget, while in May — four million hryvnias, i.e., nine or ten times more. The situation with the registration of containers in ports is similar. The Kyiv regional and oblast customs services both noted 1.5 more contributions (19.6 billion hryvnias for the former). A sizable increase was registered at the Dnipropetrovsk Customs. All in all, in 2010 earnings increased by 20-50 percent, with the exception of the Energy Regional Customs.”
Speaking of which, what awaits the Regional Energy Customs? Will it be abolished, in accordance with the administrative reform, or will the staff just be reduced?
“We launched its dismantlement, and have already sent relevant suggestions to the head of state, because this agency was created on the orders of the president of Ukraine in 1996. Today the Regional Energy Customs is a cumbersome structure, with an inflated staff in its Kyiv headquarters, and innumerable regional departments (with three to five persons working in each of them). Alongside these departments for energy, there are regional customs offices which clear goods through the customs in the same manner as the Energy Customs.
“Thus, within the framework of administrative reform, the need to optimize expenditures arose, since the SCSU must reduce its staff by 30 percent, i.e., by 5,200 persons. Instead of the Energy Customs, energy resources will have to be cleared through a relevant subdivision of the Kyiv Regional Customs, comprising 15 people instead of 150. Besides, a recent internal inspection of the Energy Customs found violations of rules in the clearing of Azerbaijani oil, which cost the budget nearly 58 million hryvnias. Other violations were also revealed.”
As far as energy resources go: I cannot help asking if the NJSC Naftohaz Ukrainy has already contacted customs agencies about the clearance of gas in favor of RosUkrEnergo, following the ruling of the Stockholm Arbitration Court?
“We have completed the customs clearance of the gas for RosUkrEnergo (RUE) in accordance to the ruling of the Stockholm Court. The required amount of gas, in transit mode, was transferred to RUE, since it was cleared by customs.
“But today we face another problem: the NJSC Naftohaz Ukrainy has not yet paid 3.2 billion hryvnias for the gas cleared in 2010, before the enactment of the law on the exemption of imported gas from the VAT. Of course, we are hoping to settle this issue without taking legal action. That is why we sent our appeal concerning the debt, to the first deputy prime minister. A meeting, which he will preside, is scheduled to take place in the nearest future.”
What are your plans for 2011?
“In 2011, the budget target for the State Customs is 93.4 billion hryvnias. Customs duties are expected to grow by 8.7 percent. I think we will carry out this task, since the economic situation has settled down, business is coming out of the shadows, the ‘black’ contraband flows are effectively blocked, the recent joint actions of law enforcement agencies together with the customs officers in the south of the country (in the ports of Odesa and Illichivsk) will help bring down more than one smuggling scheme, so the only thing to be done is to watch if goods are properly declared. Take it or leave it, but in 2011, certain individuals will not be able to make 100-300 percent super-profits, due to the minimization of taxes. We are not going to let anyone evade taxes at the border.”
“THERE IS NO CUSTOMS CLEARING FOR THE PRODUCTS OF LIVELA”
Has the question of taxing petrochemicals imported to Ukraine by the company Livela been settled?
“Customs had to clear the company’s petrochemicals without levying taxes following a string of court rulings at various levels, issued many years ago. However, as soon as this problem became more vital, the SCSU addressed the Prosecutor General’s Office and the High Administrative Court, asking them to revise these decisions. At present, the products of this company are not cleared through customs. At the same time, the company was sent tax notes informing them of the levying of the debt during clearance. Still, this problem has not been legally settled. We are awaiting the court’s ruling, and hope that it will be in favor of the state.”
You mentioned the situation with suspended cargo clearing at the South Customs. Entrepreneurs insist that it is caused by the pressure from customs officials, who demand kickbacks. What do you think is the main reason behind the delay?
“The situation at the South Customs is stirred up by both certain political forces and by business owners, who will not pay fair taxes to the budget and want to keep making super-profits. At present, the State Customs Service is negotiating with the Ministry of Infrastructure and the SBU, in order to hold an audit and inspect all cargoes in the ports of the South Customs. This will help reveal shady smuggling schemes.
“At the moment, the ports of Odesa oblast are working in concord. Since the beginning of the year, they have received 26,500 containers. Over 22,000 are already taken away. Yet almost 4,500 are still at the port. And the customs officials are not to blame. I find this situation strange — when containers stay in ports for an entire year, and can not get cleared through the customs. I suspect it to be a contraband scheme.
“To avoid ‘jams’ in ports, we have sealed the inbound containers, and sent them to the customs agencies at their respective destinations. That is where they are going to go through all necessary procedures, including a detailed inspection if necessary. Everything is transparent on our part.
“Yet I want to emphasize that the 500 containers, off to domestic customs, were immediately placed at temporary warehouses. More than 900 were never submitted for customs clearance at all. A question suggests itself: Why? And the answer is very simple: none of the importers was going to pay the required taxes in full.
“I want to put these issues in order, since the border must not be a tool for profiteers who harm the country’s economy.”
Still, you cannot maintain that it is only business that is evil. On the other side, corrupt customs officers are no rarity either?
“One can come across such individuals in all state agencies. Unfortunately, customs is no exception. I have said more than once that the entire country is plagued with corruption. Yet the country’s leadership and the administration of the Customs Service has taken an uncompromising attitude while trying to uproot corruption. Today we are using all means available in order to reveal the corrupt individuals.
“I have already mentioned the heads of certain regional customs agencies who have already been punished. I will also add that last year over 400 persons were dismissed from customs agencies due to various violations, including corruption and assistance in shielding the contraband of goods across the border (in Lviv, Volyn, Zakarpattia, and Odesa oblasts, as well as in Cherkasy, Sumy, and Hlukhiv).”
Last year a suggestion was made at a session of the board of the State Customs Service that customs checkpoints be equipped with video cameras. How far has this idea been implemented?
“The creation of a video surveillance system at the board will indeed minimize corruption and simplify customs procedures. Today in Ukraine there are 244 actual checkpoints and 288 customs clearance points inside the country. The preliminary reckoning shows that equipping them with video cameras and creating a monitoring center, which will record and transmit on line the videos from the border, will cost 500 million hryvnias. At present, such money is unavailable: in 2011 only 20 million hryvnias have been allocated for information and technical needs. However, we expect that this problem will be partly solved with international technical assistance.”
Only one year is left to prepare for the Euro-2012. What are the State Customs Services’ tasks in this direction in 2011?
“We have entered the final stage. The government is considering a project of simplified customs declaration for football fans, developed and submitted by our agency. Besides, we have agreed with our Polish counterparts that during the championship we will ensure joint examinations at all checkpoints (on the Polish side of the border). That is, an individual will be checked at a single checkpoint, where the joint Polish and Ukrainian customs examination will be held. We also plan to create special Euro-2012 passages for fans, which the owners of tickets to soccer matches will be able to use.
“Besides, the parliament has already approved a draft bill authorizing customs officers at the border to conduct preliminary examinations of documents. Thus, the number of supervisory agencies at the border is going to decrease. This also will speed up the procedure of customs clearance.”
Aren’t you afraid of dismissal, which, according to statements by certain political forces, awaits you?
“They have been eager to fire me since I was appointed, because many do not like fair play. Nearly a year has passed, but these individuals still have not realized that it isn’t going to work otherwise. No pressure or dirty gossip is going to help them. And only the head of state can evaluate my professional activity.”
