Rada’s report on tax “money orders” published

Under a single plan, the monthly volume of fictitious VAT realized is estimated to be around 2.5 billion UAH.

The Temporary Investigation Commission of the Verkhovna Rada has published a report on tax “drafts”.

According to their findings, the most common scheme for VAT evasion is the formation of a “fictitious” tax credit.

This scheme consists of combining in the system a tax credit formed as a result of the importation or manufacture of consumer goods or those that are in demand in the shadow market and then sold for cash without paying taxes, and a tax liability that arises of the taxpayers of the legal sector of the economy when they need to legalize goods manufactured in the shadow sector of the economy in the Electronic System of Administration of the Value Added Tax.

The operation of the “money order” is based on the introduction of deliberately false data on the supply of goods in the fiscal invoice, whose tax credit is then used to reduce the fiscal obligations derived from the supply of goods and services provided by the legal sector of economy.

“That is, the source of a” fictitious “tax credit is the sale of goods for cash without any consideration with the subsequent sale of documents for the same goods to the customer of a tax credit. A characteristic feature of” twisting ” it is a combination of incompatible goods in transactions, for example, purchases of cigarettes, while selling cucumbers, corn, etc. ”, – he explains in the report.

As reported, an analysis of the data from the Unified Tax Invoice Registry was carried out and commercial entities were identified that, during January 2019 – March 2020, carried out operations with the substitution of commodity nomenclature.

The volume of fictitious VAT sold by such taxpayers is approximately UAH 2.5 billion per month. Furthermore, this tax credit is diverted from the “scraper” through the “transit countries” to the beneficiaries.

It should be noted that during this period, business entities formed and used a fictitious VAT in the amount of at least 28.686 billion UAH. The Commission draws attention to the fact that the amounts shown are not final; it is just a trade loss, “kink”.

On average, 100 to 250 taxpayers participate in these transactions per month.

In addition, the territorial bodies of the tax service were established, in which the largest number of such taxpayers are registered: these are the State Tax Administrations in the regions of Lviv, Kiev, Donetsk, Zaporozhye, Kirovograd, Kharkov and in Kiev.

Also in the VSK report there are acts of abuse by tax officials.

In general, the commission concluded that the state budgets for 2019 and 2020 (from January to April 2020) were not fully implemented due to deficiencies in the administration of taxes, fees and customs payments by the fiscal, tributary and customs, as well as the existence of schemes based on the artificial formation of a tax credit for value added tax, insufficient actions to prevent and counteract smuggling and reduction of customs payments.

The most widespread scheme of VAT evasion is the formation of a “fictitious” tax credit, known as “torsion”, which became general during the period studied by the Commission.

We will recall, in May 2020, that former Finance Minister Igor Umansky announced the so-called drafts – a scheme for illegal VAT refunds. Its essence lies in the fact that one company sells documents to another for its import VAT paid at customs and imported products are sold on the spot market. According to Umansky, according to such schemes, the state budget annually loses about 60 billion UAH.

In the summer, the head of the tax office Oleksiy Lyubchenko said that the amount of “twisted” value added tax reached 40 billion hryvnia a year.

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