18.09.2024 Money laundering

Bribery and smuggling are the main reasons why customs is overloaded. Smuggling of apple equipment and shadow earnings of millions

Рада підтримала законопроєкт щодо перезавантаження митниці: що зміниться

The Verkhovna Rada of Ukraine has officially supported a tax increase for Ukrainians. In search of money to cover the budget deficit, our lawmakers have taken an extensive approach – to collect more taxes from those who still pay. That is, from the poor. Now the belt is tighter, and the likelihood that clean businesses will go into the shadows has instantly increased. But, as the MPs themselves say, budget revenues, as well as funding for the Armed Forces, will increase significantly.

The Parliament also supported the reboot of the customs, which includes reforms to re-certify every 18 months, increase salaries and transparent competition. But how effective this model will be remains an open question.

In the meantime, the flow of smuggling continues and is likely to increase given the complications that the government is introducing for small and medium-sized businesses in the country. Let’s recall the sensational story of the BES investigation into tax evasion and the sale of contraband products by the YABKO chain of appliance stores. Back then, it was about UAH 63 million lost by the state. But how did the investigation end? Did the YABCO stores cease their operations? Absolutely not. They continue to sell smartphones, laptops, etc. and are already accepting pre-orders for new iPhones.

So isn’t de-shadowing a more effective way to bridge the budget gap? And it doesn’t require raising taxes for the population; it’s enough to fight the corruption system and collect mandatory payments from those who evade them.

Meanwhile, businesses continue to actively use all possible loopholes, especially in terms of paying kickbacks to tax authorities, customs officers and law enforcement. In most cases, we are talking about companies that import goods through “gray schemes” and sell them through “gray schemes.”

For example, by using conglomerates of individual entrepreneurs that are concentrated around a “parent” retail network. With two hundred sole proprietorships registered as managers, cashiers, drivers, or front companies, it is possible to generate a gross turnover of UAH 1 billion in annual revenue. And instead of paying 20% VAT on imports, you’ll only have to pay 5% of the single tax on “manual sole proprietorships.” And pay no income tax at all.

For reference, the estimated annual turnover of companies selling online apple technology is approximately $280-300 million per year. If they paid value-added tax on imports, these companies would have to pay the equivalent of $50 million or almost UAH 2 billion annually to the state budget. But, in fact, they paid less than $15 million at best (if the import of goods is registered as individual entrepreneurs).

If we assume an average rate of return on sales of 50%, the profit of the group of online trading companies for Apple products alone could be up to $150 million per year, and the amount of income tax (18%) could be $27 million or UAH 1.1 billion per year. But the state budget is not likely to receive such amounts.

Avic: tax evasion and smuggling of equipment

In order not to be unfounded, let’s use an example. The Avic equipment retail chain has its own stores in a number of Ukrainian cities, including

c. Kyiv, 2-4/7 Pushkinska St. (new Yevhen Chykalenko St.),
c. Kharkiv, Pavlivska Square, 8,
c. Odesa, 41 Preobrazhenska Street, as well as the online store of the same name.

Новый магазин в Харькове, Avic - Мито-дизайн

After conducting our own research, we found out that the Avic trademark belongs to Dmytro Butenko, a private entrepreneur. And in the public offer for the online store “AVIC.ua”, the seller is Dmytro Butenko, a private entrepreneur.

By the way, Butenko is a deputy of the Kharkiv City Council from the Servant of the People party. In 2019, he ran for the 9th parliamentary district from the “Shariy Party” of the propagandist of the same name. That is, now Butenko combines entrepreneurial smuggling activities with being a deputy.

And now to the already mentioned scheme of individual entrepreneurs

Avic offline stores offer several types of payment for goods:

Cash. Employees of Avic stores sell some goods without passing them through cash registers and PPOs. After the sale, customers receive a non-fiscal receipt. Consequently, the funds received from customers are not reflected in the company’s accounting documents, which allows to hide a significant part of cash income from the control of the State Tax Service of Ukraine. The above is done to conceal the real income of the individual entrepreneur Butenko Dmytro Ihorovych, as this individual entrepreneur acts as a seller. In fact, more goods are sold than officially reported in the accounting records, which leads to non-payment of taxes on part of the goods sold.

Accounts of other individual entrepreneurs are also used to disguise Avic’s real income.

Cryptocurrency. Avic customers can also make payments in cryptocurrency, as explained to customers by employees of these stores. This is realized through the Whitepay payment system to a number of crypto wallets.

When placing an order and paying in cryptocurrency, a specific crypto wallet is offered. In particular, three different cryptocurrency wallets were offered during three attempts to pay in cryptocurrency for goods in the Avic store:

  • TALhZoiLybpbxcoydHxovF4fiziTKTmvBm;
  • TERZVHe1QVxHQoWP7TM8KvmZLvbQebcVo5;
  • TTA1KSyMhn7TeatV9Q9QgJ3hp7HSVppgXJ.

We think the list is endless and includes a dozen different wallets. Interestingly, all funds received as payment for goods in Avic stores in the form of cryptocurrency are not reflected in the accounting documents of Butenko’s sole proprietorship. This means that they are not accounted for.

At the same time, according to rough estimates, the online turnover through Avic’s online store alone is $8,650,000 per year. In offline stores, it is approximately $10,000,000.

I wonder what Kharkiv Mayor Terekhov and his colleagues think about the business activities of Butenko, a member of the Kharkiv City Council.

Avic is also involved in smuggling equipment. First, using controlled individuals, Butenko purchases goods in Southeast Asian countries such as China, Hong Kong, and Vietnam, where illegal production of uncertified Apple equipment, smartphones, accessories, TVs, household appliances, and similar goods is established, which are several times cheaper than certified equipment from official suppliers.

After that, the transportation of the equipment is organized through smuggling to Ukraine. Moreover, the goods are imported into Ukraine by road. This means that both customs officers and border guards are actively involved in the process.

A little math to understand the scale of smuggling: in 2023, 250 thousand iPhones were officially imported to Ukraine, and 940 thousand were registered in the system! So where did almost 700 thousand expensive gadgets come from?

Perhaps they were registered as humanitarian aid for the Armed Forces and residents of the frontline regions?

We demand real reforms and a real fight against smuggling of equipment and shadow ways of tax evasion. We continue to collect information and send it to law enforcement and regulatory authorities for immediate action, inspections and investigations.

We ask you to do the same notify about the known methods of selling gray equipment and the stores that sell it. We also urge you to boycott and not finance this kind of business.

Did you witness a crime?

Let us know about it. We will help protect the violated rights!

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