Ukraine is losing billions as up to 40% of grain harvest escapes taxation - The Economist

Ukraine is losing billions as up to 40% of grain harvest escapes taxation - The Economist

Kyiv  •  UNN

May 8 2024, 03:07 PM • 18079 views

Over the past two years, Ukraine has lost about $3 billion in tax revenues due to the fact that about 40% of the grain harvest was diverted from taxation through various fraudulent schemes.

About 40% of the grain harvest is avoiding taxation, and over the past two years, Ukraine has lost about $3 billion in revenue because of this. This was reported by The Economist, writes UNN.

Details

Taras Kachka, Deputy Minister of Agrarian Policy of Ukraine, noted that disruption of logistics chains due to Russian shelling has created conditions for farmers to "optimize" taxes. According to his estimates, about 40% of the grain harvest is avoiding taxation.

The publication writes that grain fraud occurs in different ways. Some of the fraud takes place directly - about 10% of tax evasion is carried out through barter and cash payments, which allows to hide income from the tax authorities.

Mines and unexploded ordnance are also used as a pretext: since land contaminated with explosives cannot be cultivated, some farmers from safe fields may not declare their harvest under this pretext.

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Farmers can also falsify documents when exporting to pass off their grain as taxed, or underreport their income when selling abroad. The proceeds are kept in a foreign bank. Sometimes the grain is sold for nothing to a related or front company (in Turkey or Romania). The proceeds from this sale are returned to Ukraine, but the proceeds from the next sale at a higher price remain abroad.

Intermediaries and fictitious companies are also used. Intermediaries, in particular, assist in such schemes for a percentage of the profits (about 2%). Companies are created to hold funds abroad, which are then closed before the currency is repatriated.

It is noted that over the past two years, more than $3 billion has been withdrawn from the country through "black grain," and according to other estimates, this figure may be even higher. Over the previous eight years, the total amount was probably $4 billion.

The publication also adds that to combat "black grain," the BES is analyzing data to identify suspicious shipments and improving information sharing between investigators and customs. The government is also easing currency controls, in particular by improving the official exchange rate to reduce the attractiveness of withdrawing funds abroad.

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