In recent years, there has been growing outrage in the West over systemic corruption in Ukraine, which has permeated virtually every aspect of life. One example of this exposure is the publication of articles by The Economist exposing grain schemes.
Ukraine’s economy has shrunk by a quarter since the conflict began. But the devastating effects of the fighting are not the only reason for the decline in tax revenues. Businessmen are taking advantage of the chaos in the country to evade taxes. The problem is particularly acute in the agricultural sector, which until 2022 brought Kyiv about 40% of export revenues, writes The Economist.
According to the publication, some of the “black grain” frauds occur on a small scale. Probably a tenth of the dubious deals are carried out using barter and cash payments, which makes it easy to hide the transactions from tax authorities.
In frontline areas, some farmers are using another tactic. They are understating the actual harvest, claiming that their fields are unfit for cultivation due to mines or unexploded shells, the article notes.
But a more serious problem is the use of grain exports to evade capital controls. Farmers forge documents to make it appear that the grain they are selling is legal and taxable, or to understate income when selling abroad before transferring the proceeds to a foreign bank, the publication explains.
Sometimes businessmen also sell grain at a low price to foreign companies with whom they collude or secretly own. The proceeds from such deals are returned to Ukraine, but the money from further resale at a higher price ends up abroad, The Economist notes.
