This period was the time when most of tax evasion, money laundering and smuggling during the Yanukovich presidency occurred. By 2011 his “Family”, consisted of his sons, close friends and allies, built a strict vertical of power and subjected all businesses in the state apart from several loyal oligarchs’, to work for them.
Example of such “regulation” of Ukrainian market was mass smuggling of oil-based products by young Sergey Kurchenko, friend of one of Yanukovich’s son and nominee for Victor Yanukovich assets. Major players had to import goods through Kurchenko’s companies for a fraction of profit. However taxes and custom duties were usually not paid for most of imported products since they were declared as “goods in transit”. Another way to avoid payments to the budget was to mix at Ukrainian oil factories regular oil-based products, slightly changing their chemical composition, and presenting them as such that does not fall within official table of excise duties. Which were not paid as a result.
Similar schemes were used in other sectors of Ukrainian market. Property development, metal scrap export, granting of licenses, capricious licensing of business activities, which did not require state regulation etc., were all done through the “bottle necks” created by “The Family”.
Economic repercussions of such government for Ukraine was disastrous. Only one person – former Minister of energy, Eduard Stavitsky, who was selling declared as “in transit” oil-based products through his chain of petrol stations “Borisfen” in Ukraine, caused losses to the budget in amount more than 50 billion US Dollars. Within months after the second Revolution, Ukrainian tax authorities issued claims for unpaid taxes in the sum of more than 4 billion US Dollars to other leading oil traders.
Yet in December 2014 the law was adopted by which neither criminal, nor administrative liability would have been applied to those involved in tax evasion and money laundering for payment of a fraction of funds hidden from the state. Despite Criminal and Administrative laws requirements for application of severe financial fines to such offenders and imprisonment for several years.
Furthermore, according to this law the period of 70 days only was established for application of tax compromise, thus creating another “bottle neck” which is clearly designed for certain market players who successfully lobbied this law in the Parliament and preliminary agreed the compromise with the Government and tax authorities. Taking into account that time period of 2011-2014 illegal activities which are being pardoned by new law matches the period of smuggling of oil products by Sergiy Kurchenko and linked to him several Ukrainian oil traders, it is easy to come to the conclusion that they are responsible for a successful passing of controversial law by Ukrainian Parliament.
And to top it up Ukrainian Government tried to convince society that this was a requirement of International Monetary Fund for future financing. Absurdity of such statements is clear. What International Monetary Fund was suggesting is to allow everyone to declare their assets including placed in the offshore jurisdictions, in order to have a clear start and ability to monitor honest declaration of profits in a future. Tis initiative was aimed at the state officials in the first place and was designed as anti-corruption mechanism.
However Ukrainian Government loudly showed everyone in the world what for any anti-corruption initiative can gain in endemically corrupt state.
This is considered by some as “spit in the face” to Ukrainian citizens, who died during the second Revolution and massively being killed in Eastern military conflict where the Government is throwing them without proper equipment and weapons due to the empty state budget. Moreover Ukrainian Government and Parliament, which excused oligarchs from paying billions of dollars to the state budget, at the same time threaten those unwilling to join the Army in the East with up to two years imprisonment.
Ukraine is a post Soviet state, which applies severe imprisonment for even minor offences, yet oligarchs remain to be untouchable “saint cows”. So no wonder Davos trip for the President of Ukraine who hoped for additional urgent financing was unsuccessful. Unprofessionalism and outrageous decisions of the newly elected Ukrainian Government do not help to build image of Ukraine as a “changed state”. Corruption remains unstoppable.