As Ukraine tries to boost its economy and strengthen financial stability, schemes are emerging that not only undermine these efforts but also cause significant losses to the state budget. One such scheme, which can be called the “Main Scheme of the Country,” involves converting bananas into “lime grain” and receiving 20% of the amount of fictitious exports from the state.
The essence of the scheme
The scheme works as follows: companies that import goods, such as bananas, find a way to fictitiously transform them into other exportable goods, such as grain. They then declare the fictitious export of these goods, receiving a VAT refund of 20% of the “export” amount from the state.
There is an importer, company A, who imported conditional “bananas” worth UAH 60 million into the country.
Money was officially paid for the import batch, and VAT in the amount of 20% of the value, i.e. UAH 10 million, was also withheld at customs.
Then the importer sells this product at the market to wholesalers for cash, for example, for 120 million UAH.
No income tax is paid because the sale was made unofficially.
He also does not charge VAT on the difference between the sales price and the customs declaration.
But he has UAH 120 million in cash, and the sale of goods needs to be closed on the balance sheet. In addition, there is another UAH 10 million in tax credit - you won't get it just like that.
And the Importer finds a "twisting company" that fictitiously buys bananas from him for UAH 60 million, that is, at cost price, and "twists" the VAT tax credit for UAH 10 million, that is, takes it for itself.
The movement of goods occurs only on paper; in simple words, only documents for goods and VAT tax credits are "sold and bought.".
At the same time, the grain trader, “Firm C,” is buying grain on the domestic market.
He does this mainly for cash or buys from farmers on a single tax who cannot provide a VAT tax credit.
As a result, the grain trader has 5,000 tons of grain worth UAH 30 million, but it is not officially on the balance sheet. There is no tax credit either. What to do?
The grain trader turns to the “twisting company” already known to us.
He buys 10,000 tons of grain from her for UAH 60 million and receives a tax credit for UAH 10 million that was previously “twisted” on bananas.
Now there is grain on the balance sheet and there is a tax credit.
Next, the grain trader exports 5,000 tons of legalized grain plus 5,000 tons of fictitious grain.
The grain trader transfers UAH 60 million to the twisting company, and, in turn, sends this money to the importer, who gives the grain trader UAH 60 million in cash.
In the finale, the grain trader also receives UAH 10 million in VAT refund from the state, which is divided among the participants in the scheme.
In general, everything is only positive:
The importer received a non-cash payment of UAH 60 million in his account and can purchase a new batch of bananas.
The exporter received UAH 60 million in cash and can again buy grain for cash.
VAT is “twisted” and divided. The twisting company received its commission.
Only the state is in the red – it paid VAT refunds on a fictitious transaction and received distorted export statistics.
