SFS Chairman: We must make it impossible for the illegal fuel market to exist

About 2 million tons of fuel are illegally sold in Ukraine every year, which is why the state budget loses billions of hryvnias in revenues. According to the interactive map perevirazs.info, as of the end of 2020, 103 points of sale of petroleum products were operating in the country with signs of violation of the current legislation. How does the state fight against illegal fuel turnover, is it possible to overcome it as a systemic phenomenon, and what danger lies in wait for the market when creating a new law enforcement structure Kosatka.Media asked the Head of the State Fiscal Service of Ukraine Vadym Melnyk.


- Vadim Ivanovich, what is the current situation with counterfeit oil products in Ukraine?

- According to various estimates, somewhere from 20 to 30% of the fuel market is in the shadows. I cannot name a specific figure, there are several methods for calculating this "shadow".

What are the constituents of this 20-30%? Firstly, the presence of under-formalized, or not at all formalized gas stations selling fuel and lubricants without full payment of taxes. Tax evasion allows them to dump the market. Legal business and the budget of Ukraine suffer from this. "White" filling stations sell fewer products, therefore they pay less money to the budget. Another component of the shadow is the import of products "in black", which is hidden from customs clearance.

At present, the State Fiscal Service, together with regulatory authorities, on behalf of the Cabinet of Ministers of Ukraine, is taking part in a special operation to identify illegal manufacture and counteract illegal import of products.

- Even 20 per cent is a lot.

- 20% of the market is in the shade - I come from the sales volume. But I am not the kind of person who evaluates the shadow market. My task is to identify and suppress the facts of illegal activity so that they do not exist in the future.

First of all, you need to find the reason for this phenomenon. For example, the vodka market. "Left" vodka is the one made on the second shift without paying excise duty, its basis is alcohol. It is not made out of thin air. Therefore, the emphasis is necessary precisely on the suppression of the illegal manufacture of illegal alcohol and its circulation.

It is the same with oil products. A finished product from Russia, Belarus, mainly diesel fuel, gets to the black market. It is imported in large volumes both "white" and with an underestimation of the customs value or volumes. There are different schemes. These products go to gas stations and are sold at discounted prices. The situation is similar to illegal manufacture at illegal refineries. Underground sellers not only do not pay money to the budget but also provide the population with low-quality fuel. While the "white" business is responsible for the quality, buying products of clear origin, or producing at their official facilities.

- What schemes, in your opinion, are most popular with those who work outside the law?

-First, the fuel is transported quite officially, with documents. At some stage, the substitution of documents occurs: the name of the product is changed or its weight is underestimated. For example, a ship transports 100 thousand tons, but according to documents, it clears customs only 50 thousand. We are now analyzing the displacement of all ships that supply fuel products. So, we conduct a preliminary analysis, and we see that it comes with a load of 50-75%. But this is illogical. That is, most likely - they were delivered "in black".

There are also types of goods declared as additives in the paint and varnish industry. They are cleared through customs at a low rate of customs duties, or even zero. Such facts existed even earlier when I worked as the head of the Main Investigation Department. For example, there was a situation with "platform" and "reform". A completely legal product was imported, but when it was realized that it was being used to illegally produce gasoline, which was then sold through a network of gas stations, this product was taxed with an excise rate of more than 200 euros. And the criminal scheme was thus blocked.

Also, now we are investigating the situation with the import at a zero rate of products that are either used to make illegal gasoline and diesel fuel, or are already ready-made fuel.

- And what is more often taken - ready-made fuel or components?

- The shadow market in Ukraine is chaotic. Someone has the capacity to manufacture unaccounted gasoline, fuels and lubricants, it is more profitable for him to buy components. Someone has a lot of "clients", and thanks to corrupt ties, he can import finished products and deliver them by fuel trucks directly to the "points".

Therefore - the schemes work both ways.

- How do your employees identify violations? With the ship, it is clear - incomplete loading.

- On the ship - not only incomplete loading. There are other factors as well. First of all, we receive operational information about existing schemes and who uses them. This is precisely our law enforcement function - by our own methods to obtain information, detect and suppress such facts.

This includes analytical work. Maybe somewhere more, and where there is the less veiled scheme. For example, according to the documents, a particular gas station cannot “spill” so much fuel per day, but it “spills”. In reporting - 1 cubic meter per day, and bottling - 5 cubes. We cannot put a video camera or a controller at each gas station and count the number of cars. But there are flow meters, meters that can solve this problem.

When there is not enough information, we cooperate with legal businesses. Each large company that operates in the legal field has its own security service. Which is also obliged to protect the interests of the company and fight the illegal shadow sector. Even by publicizing criminal methods. Therefore, sometimes we ask to provide us with information about the subjects who work "in black".

-Does the business respond to your requests?

-Thanks to cooperation with business associations, we are now waging a struggle, which is organized under the auspices of the Prime Minister of Ukraine. I think that it is quite effective, I see the results that we are giving. We not only stop the work of illegal gas stations, retail trade but also try to make sure that they no longer work. That is, we are forcing to remove these complexes of gas stations, to take them out to storage so that they do not appear on the market again.

In the last three months alone, tax police officers discovered 7,587 violations, made 346 procedural decisions within the framework of administrative proceedings, 144 gas stations ceased their activities. Since the beginning of the year, 7 large illegal industries (refineries) have been identified, 15,712 tons of illegally manufactured fuel have been discovered and seized for an approximate amount of UAH 490,532,000.

- But it is not difficult to install the barrel and the filling complex again?

- If funds are invested again and the same barrel is installed, this cannot be overlooked. And if they do not see it, it means that they are corruptly interested in this. The question is to who lives in this territory and allows such a "business" to work. Law enforcers know exactly who and what is doing on their territory. Likewise - the officials of the OTG, also see who is located on their land. It is beneficial for them that their land is officially rented and paid for.

Another issue is that some gas stations have a license, but sell unrecorded products. Here the STS is connected, which controls the completeness of payment of taxes and the volume of sales.

The problem can be overcome when all law enforcement agencies work in an integrated manner. The Prime Minister has just organized interdepartmental groups based on the state administrations of each region to combat the shadow market of excisable goods. I think this is very timely.

For this barrel, which you are talking about, to receive permits, it is necessary that all regulatory bodies fully fulfil their official duties.

On the website of the Oil and Gas Association, there is a list of 475 licensed filling stations. And according to the association, some of them did not always get them legally, some of the documents that are part of the license are fake. We are checking it now.

Often they tell us so - you have worked, and the illegal gas stations have resumed work after a while. This is a negative factor for us. Investigating criminal proceedings. we must find out the reasons that enable this shadow market to exist.

- What in the current legislation makes such a high percentage of the shadow market possible?

- The problem is not so much in the legislation as in the fuzzy regulation of the accounting system on the market of fuel materials: receipts, processing, costs. Everything needs to work according to the same standards. You should not interfere with the business of conducting legal activities and tightly control it. We just need to get data from the correct certified flow meters, meters, level gauges. Let the business work, and we will see that the balance is the same in quantity and taxes are paid.

If there is a clear record of entry, distribution and sale - the problem will be solved.

And this applies not only to fuels and lubricants but also to cigarettes, alcohol, alcohol. It can be the same electronic excise stamp that allows you to track the movement of goods.

- As much as possible?

- This is real. It works in other states. The question is in technical and financial capabilities, in my opinion. We spend a lot of public service resources to regulate and check. It is important here not to get carried away with the process. We will not keep up with everything. The law enforcement agency should be more analytical. Why put an inspector at every gas station? It is necessary to clearly define the procedure for conducting accounting at the entrance to the country, during manufacture and at the exit to the consumer's tank.

I know that they are working on it now. The Ministry of Digital Development is engaged in the digitalization of processes in the entire excisable sphere. Hope it will be soon.

- Has your service submitted any proposals to the government in this regard?

- We work closely with the Tax Policy Committee of the Verkhovna Rada, with the Law Enforcement Committee. They also need to understand the situation. If we say that the problem is that tax rates are high, then we need to figure out why they are high, how this is confirmed and why business cannot pay such a rate. But because the "shadow" interferes with him. If not for dumping, I would have paid. And so - the load is big, I pay taxes and still have to somehow survive, the sale price must be reduced in order to somehow stay in the market. I want to wear white, but the shadowman does not.

And it is also necessary to identify the reasons why the “shadow” works, and remove them at the legislative level, to narrow the opportunities for the shadow economy to maneuver.

- A week ago, the President signed a law on the creation of the Bureau of Economic Security. Accordingly, the SFS will be disbanded. Will it not turn out that the specialists leave your service, do not reach the BEB, but settle at the same "grey" or "black" gas stations?

- The question lies in the financial plane. There are many employees for whom work results come first. But with this result, he cannot feed his family. And if the salary is not serious, and I consider the salary of about 50 thousand hryvnias worthy, then most likely it will go into business. Because he clearly understands that he will receive 2-3 thousand dollars a month there, even just giving professional advice. And we forced him to go into the shadows, because we cannot offer a decent salary for which his family can live.

Sometimes they ask if this is a lot - 50 thousand hryvnia for a civil servant. Here you have to build on the purchasing power. If today renting an apartment - from 10 to 15 thousand hryvnia, and cheaper because of the wife and two children. You need to buy groceries - this is somewhere between 10-15 thousand hryvnia. This is already 25-30 thousand. I also want to put off on vacation and buy shoes for the child, which cost 1000-1500. That is, consider that 50 thousand hryvnias are just a decent salary, which will significantly reduce the desire to take bribes.

But BEB has good salaries if I'm not mistaken - from 30,000 hryvnia. And many decent officers and specialists are ready to work. Many of our guys like to achieve results. I try to give tasks clearly, they give a result and for this, they get a decent attitude. I cannot write them a bonus today, because there are no funds. But at least I don’t suppress, I don’t drive, I fairly estimate their contribution to the work of the SFS. We have to take care of people in various ways to keep them. I try to do it.

- I have a question about the turning point when the old will be destroyed and the new will not be built. And we will lose the last people who understand how everything works ...

- Serious question. I do not urge to take everyone from the SFS and transfer them to the BEB. But you said correctly - these are specialists who know the processes.

The new service will focus more on analytics. But why are we sure that this analytics will work clearly from the first day of the service launch and will provide the correct source materials? It's impossible. Some processes in the early stages may have to be maintained manually.

Let me give you an example. A ship came with fuel and lubricants. With a displacement of, for example, 15,000 tons. Two-thirds were cleared through customs, one - no. A third goes to illegal gas stations or immediately to illegal fuel trucks, which will merge on collective farms, not even at gas stations. The question is - how many are these fuel trucks? It is clear that we do not have so many people to chase everyone.

Therefore, it is necessary to make sure that the ship cannot be cleared incompletely. It is necessary to understand where the gaps are, eliminate them and not allow him to do so in the future. There must be operational connections with the side where it booted. It is also clear there how much it was loaded, the documents on the ship, for what amount the goods were insured. The owner of the cargo will not insure only part of the goods, he will try to protect the entire volume. But somewhere along the way, these documents are changed, and we get a ship that is supposedly half loaded.

Will this new body take over all the powers to combat counterfeit products - yes, it will. Because article 204 of the Criminal Code, which defines criminal liability for illegal manufacture, storage, sale or transportation to sell excisable goods, will be under the jurisdiction of this new body.

But if we do not have enough strength, then why not carry out joint operations with the involvement of the authorities, within their competence, in joint work, joint interdepartmental investigation teams? That is, BEB will have to understand, assess the market situation and organize a fight against these facts. First of all, break the system. If we cannot break it, but the situation is widespread on the market, then we will have to look for ways to connect other services to help fight.

But while the BEB will be created, while it will work ... We will untie the hands of fraudsters for almost a year. Don't you have that feeling?

- No. At this particular time, this question is for me. My task before the start of the work of the new body is not to slow down the pace of reducing the "shadow" in Ukraine. And we are doing this very actively.

While there is no new body - there is SFS, this is clearly spelled out in the law. That is, before the start of work, BEB SFS fulfills its functional duties, although not more than 6 months.

I hope that BEB contests will be won by guys who already have experience and will come to work there. And that they "on the go" will intercept the situation, will work on all these facts of shady, criminal acts. This information exists, it just needs to be properly obtained and documented. We, as law enforcement officers, have these methods. We find information, document and launch it into work within the framework of criminal proceedings.

I don't think there will be problems during the transition period. But it is important how correctly the work of the BEB starts. I will return to the specialists who will be accepted into this service and how it will be organized. Because, indeed, before the launch of all analytical software, you will need to work in manual mode. But the model of work there is completely different: from analytics to criminal proceedings. Analytics - then action. From a systemic phenomenon to special cases. We will not catch every car, but those 5 thousand tons mustn't leave the ship without going through customs clearance. It is necessary to draw up such work algorithms so that they make impossible the existence of corruption, ineffective fulfillment of the tasks of this body both at first and in the future.

Tags: The Cabinet of Ministers, oil, legislation, Ukraine, petroleum products, gasoline, oil market

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