The Verkhovna Rada of Ukraine has adopted the draft law on the customs reboot, which provides for a salary increase for customs officers, an annual external audit, a transparent competition for the head of the State Customs Service, re-certification of all employees, etc.
This draft law is a structural beacon from the International Monetary Fund, the World Bank and the United States that will unlock $6 billion in aid for Ukraine. Despite the fact that MPs voted in favour of reforming Ukraine’s customs system, a number of experts believe that this reset is ineffective. In an exclusive commentary [Kommersant] economist and financial analyst Oleksiy Kushch said that the draft law will not remove the corruption component, which is the main problem of customs.
“The main problem of customs is a huge gap between the physical flow of goods that pass through it and the taxes that are levied on these flows. Previously, this gap was analysed in the following way: we took the physical flow at defective prices and the figures calculated by customs. The gap reached $30 billion a year in imports and exports,” the expert said, noting that he had recently published materials in which he pointed out the following: for example, with Poland, the gap is several billion euros. Ukraine also has a huge gap with China, Turkey and other countries.
“In fact, this is grey imports: some of them are not accounted for, some are valued at fictitious prices. There are also grey exports, which are used to calculate VAT refunds for non-existent goods or for overstated volumes of goods. For example, the same grain, which may be several times less, and the state refunds VAT as if there were several times more,” Kushch said.
He stressed that the previous and current draft laws on customs reform do not take into account one of the most effective control models that would resolve the problem of corruption.
“This model is a mirror comparison of the statistical base of our customs with the bases of our trading partners. In other words, for each KVED, each invoice, each consignment note, even each batch of goods, it is possible to calculate the differences between customs offices,” said Kushch.
In his opinion, such monitoring would allow for real-time detection of the relevant differences for each customs office.
“It would be possible to include a clause in the contracts with the heads of customs that if discrepancies in performance are found during the quarterly inspection, this is a reason for dismissal at least. But such a mechanism still does not work here. Although, for example, when President Zelensky met with his Turkish counterparts, he signed a number of agreements, including an agreement on the exchange of such mirror statistical information between the customs offices of Ukraine and Turkey,” the economist said.
However, at present, such monitoring of the entire customs is not backed by the letter of the law.
“Nor is there a law to increase the responsibility of regional customs managers for discrepancies in such monitoring. If such discrepancies are found now, customs officers say that these are shortcomings in statistical databases or methodology for calculating the value of goods. That is, it is not considered a crime. And they take advantage of this, so the differences are very significant,” Kushch added.
According to his estimates, in different periods, such differences range from 15 to 20 billion.
“In fact, we divide it by 6 and get from 2.5 to 5 billion dollars in lost customs revenues. This is only if we take into account VAT, without export and import duties,” he said.
According to the expert, the draft law recently adopted by the parliament does not affect the corruption component.
“It contains certain provisions for digitalisation, efficient document flow, and reduces personal contacts between customs officers and entrepreneurs. In other words, it can help shape Ukrainian customs into a more European format. But the main problem is the huge corruption, which will still reformat the customs to suit its needs,” summed up Oleksiy Kushch.
Author – Alyona Kaplina