EBA calls for strong action against smuggling
Ukraine’s state budget loses billions of hryvnias in duties and taxes annually due to smuggling and illegal imports. For instance, the loss reached 70 billion hryvnias in 2017.
According to experts’ and market players’ data, the grey market is becoming extremely widespread. For example, it reaches about 60% market share for alcohol, from 60% to 80% for household appliances (e.g. Large Screen TVs and Professional Cameras), 40% for some food categories, 25% for pesticides (more than 70% on retail market), and so on.
Dishonest business entities avoid paying customs duties and even get returns on taxes paid abroad. The price difference between officially imported goods and illegal ones could reach more than 50%.
In numbers, imports valued above 100,000 Euros must be charged 10% customs duty and 20% VAT. Consequently, the after-tax price would be 132,000 Euros. Unscrupulous entrepreneurs can buy the same goods for approximately 82,000 Euros (by paying no taxes in Ukraine and getting taxes returned abroad).
International research has shown the same destructive situation. For instance, Ukraine ranks last among European countries in The Global Illicit Trade Environment Index and the lowest in the Customs environment category.
The European Business Association supports fair business and strongly backs an effective fight against smuggling and shadow schemes at customs. We say “no” to Customs and law enforcement authorities providing a cover for illegal smuggling.
We are grateful to the Government and Prime Minister for paying special attention to this problem and, together with law enforcement agencies, working on an action plan to combat smuggling and shadow schemes at customs. However, we exhort Government and other state authorities to start implementing, not just planning.
Business calls for action on Customs reform. Further delays will continue to slow the growth of the national economy as well as make Ukrainian business less competitive and attractive for investors.
Firstly, it’s important to improve the work of Customs and control authorities at the border as soon as possible and create an independent analytical agency, which will investigate and prevent financial crimes. The newly created Agency must operate separately from other law enforcement authorities and the economic departments of the SBU, Ministry of Internal Affairs and National Police must be closed. The new Agency is supposed to stop pressure on business and give investors the green light in Ukraine. The following link shows the EBA’s ideas on how the Agency should function.