President Leonid Kuchma has instructed the Ministry of Justice to speed up the execution of court orders to seize funds in the accounts of the United Energy Systems of Ukraine (UESU) Corporation. The instruction followed a meeting on budget problems attended by top government and judiciary officials. UESU’s tax arrears exceeded 7 million hryvnias at the end of last year. The state is so far unable to get even a portion of these funds. According to the State Tax Administration (STA), the UESU industrial and financial corporation is Ukraine’s largest tax debtor.
STA Chairman Mykola Azarov noted that courts had already handed down five rulings on suits from tax collectors. He did not disclose the overall worth of the upheld lawsuits. “The current procedure forces us to file a lawsuit against each specific operation,” Mr. Azarov says. According to him, the Ministry of Justice execution service has thus far done nothing to fulfill the court decisions.
Oleksandr Lavrynovych, Ministry of Justice state secretary, admitted he was surprised to learn that it was impossible to recover UESU’s tax arrears. He claims the tax authorities did not inform the ministry’s leadership about the problem that had arisen. Mr. Lavrynovych assured the meeting he had already duly instructed the Dnipropetrovsk Oblast Bailiff Service. “We are sure to find out whether the court orders were not executed due to work overload, for other reasons, or maybe on purpose. We will check it out,” Mr. Lavrynovych promised.
Liudmyla Pavlova, director of the Ministry of Justice bailiff department, announced there are four stages of satisfying claims against United Energy Systems of Ukraine, with budgetary claims being satisfied last under the law. “But I do not know all the details of this case so far. We’ll look into it in a few days,” Ms. Pavlova said. In her version, if the tax-related court decisions have not been fulfilled for purely technical reasons, these will be sorted out urgently.
Addressing the budget-related meeting, Mr. Kuchma did not hide his discontent over a strange delay in UESU debt recovery. The head of state surmised that delays in executing court orders to recover heavy tax arrears were in all probability instigated by those who cash in on this tardiness. The United Energy Systems of Ukraine industrial and financial corporation was registered in 1990 as a limited liability company founded by three firms – two residents of Ukraine and the British United Energy International. According to the Tax Administration, it is through the London- based shareholder that UESU smuggled the lion’s share of its profit out of Ukraine. Its assets were also traced in a Nauru offshore bank. The tax authorities imposed heavy penalties on the corporation for failure to return of hard-currency earnings from abroad. In the words of Yuliya Tymoshenko, who earlier headed UESU, the company’s turnover was $10 billion in 1996, an all- time high for private Ukrainian companies. The company’s heyday coincided with Pavlo Lazarenko’s premiership. It is over his signature that UESU received quotas for the supply of Russian and Turkmenistan gas to Ukraine’s leading industrial enterprises.
It is a moot point whether the STA will manage to recover the money owed from foreign accounts. At least the public at large is unaware of such precedents.
INCIDENTALLY
As is known, January 1, 2002 saw the full entry into force of the law on budgetary payments, which calls for referring all disputes between tax collectors and taxpayers to judicial bodies. Meanwhile, Mykola Azarov is surprised with most court rulings over tax-related suits, for they are so illogical and unjustifiable. The STA chief said at the April 22 press conference that this country is not yet prepared for this procedure. It is not accidental that the mentioned meeting with the President discussed how courts could cope with hearing 78,000 cases about UAH 8 billion in tax arrears. “If the courts had upheld in the first quarter all suits of the tax service, the state budget would have gained an additional UAH 1.6 billions in revenue,” Mr. Azarov says. Despite obvious difficulties caused above all by the Verkhovna Rada decision to increase budget revenues by UAH 2 billion, the STA chief is still convinced that a budget deficit can be avoided in 2002 if all those interested in keeping the treasury afloat act in unison. Nor did the STA chairman evade the subject of the past parliamentary elections. He thinks it is shadow capital, not administration, that provided the main resource for the elections. “If society fails to admit this and does not change the legislative system so as to minimize this factor, our elections will never be democratic,” Mr. Azarov noted. Although the tax service is unable to minutely trace in a short time the application of shadow schemes in election campaign funding, it still possesses a wide range of information to process, Mr. Azarov said.
