Igor Bilous
The act of checking the activities of Igor Bilous and his deputies showed the ineffectiveness of their work in the State Fiscal Service
On Tuesday, May 19, the Verkhovna Rada voted to appoint Igor Bilous as head of the State Property Fund. On Monday, the ex-chairman of the State Fiscal Service attended a meeting of the Economic Policy Committee, where he received the support and recommendations of the majority.
“Imagine a government that owns and operates hundreds of businesses. What do we get as a result? One or two enterprises that are truly profitable,” said Bilous, clearly outlining his first steps as a leader: preparations for the privatization of large state-owned enterprises. As an example, he named the Odessa port plant.
Bilous was forced to resign from his post as head of the State Fiscal Service (SFS) in February this year. His resignation was preceded by an internal investigation into the improper performance of his and his deputies’ official duties.
The classified conclusions of the internal investigation, which were received by the editors of the Radio Liberty and Channel One program “Schemes,” contain a number of facts that show that no reform of the tax service and customs has occurred in Ukraine. The situation sometimes even worsened.
But Bilous does not consider his work at the State Fiscal Service unsuccessful. “We need to look at the real results for the year. A lot was left behind the scenes… You understand that when we arrived, there was almost zero in the state budget. And now the prime minister is reporting that there are positive results in accumulating money in the single treasury account. And if you don’t know, from month to month VAT is collected in Ukraine more and more. This is one of our biggest achievements,” he noted.
Bilous admitted that he did not have time to reform customs and transform the tax police into a financial intelligence service. And he left the post of head of the State Fiscal Service with the realization that it would be much easier for his successors to work. They say that his team overcame the main problems after the revolution.
The Cabinet of Ministers classified its findings and refused to provide Radio Liberty with a request for access to public information. But journalists from the Schemes project received a copy of the report of a special commission, which included representatives of government bodies and business associations. The report covers the work of the State Fiscal Service from the appointment of Bilous and his deputies Vladimir Khomenko and Anatoly Makarenko on June 6 until his resignation on February 23, 2015.
During the work of the commission alone, 250 requests from business representatives regarding the work of Belous and his team were received and processed. At the same time, the investigation notes that 52 reviews regarding the work of the DFS were approving, but “with the same verbatim content,” so the commission did not take this information into account.
1. Failed reorganization
In his position, Bilous failed to create a government body with a clear, logical and controllable management vertical, which led to the creation of an extremely “ineffective management system.” Thus, both quantitative and qualitative indicators of the fight against offenses in the tax and customs spheres, “organizational and personnel stability,” and the timeliness of personnel appointments in the State Fiscal Service suffered.
2. Had constant conflicts with customs
Within the structure of the State Fiscal Service there was a conflict between two leaders, Bilous himself and his deputy Anatoly Makarenko, who was responsible for customs. In particular, the commission found that Belous refused to appoint candidates for customs-related positions submitted by Makarenko. At the same time, he “did not respond twice to A.V. Makarenko’s internal notes. on the need to remove the head of the Volyn customs of the State Fiscal Service Andreykiv A.I.”
The commission also found that Bilous constantly initiated inspections of Chernihiv customs, while Makarenko claimed that it was “exemplary.”
3. Couldn’t overcome old VAT refund schemes
The problem of unrefunded value added tax did not improve during Bilous’s chairmanship. The commission came to the conclusion that “there is a negative practice from previous periods of maintaining manual mechanisms for regulating the VAT refund procedure.”
In particular, under Bilous there was “the systematic provision of positive conclusions by the State Fiscal Service on VAT refunds to payers who, in particular, export through offshore countries.” Also, the problem of overpayment of VAT by businesses has not been resolved.
4. Failed to collect debt from Kolomoisky
The tax office under Bilous did not apply any sanctions against the largest debtor of PJSC Ukrnafta to collect debts, which at the beginning of the year amounted to 1.7 billion hryvnia.
50% + 1 share of Ukrnafta belongs to the state company NJSC Naftogaz of Ukraine. About 42% is owned by companies associated with oligarch Igor Kolomoisky, who controls the company’s management. Previously, Kolomoisky publicly stated that he would not pay his debts.
In November 2014, the prosecutor’s office of the Sumy region opened criminal proceedings on the fact of non-payment of rent payments by PJSC Ukrnafta for the extraction of hydrocarbons in the region.
5. Tax administration has deteriorated
Problems with tax administration not only were not resolved under Bilous’s presidency, but also worsened. As one illustration of this conclusion, the commission gives the example that “in January–February 2015 alone, the number of refusals (to register tax invoices in the State Fiscal Service register) increased by almost 2 times compared to the entire year of 2014.”
The problem of tax administration is one of the most painful for business in Ukraine. According to the World Bank rating, Ukraine ranks one hundred and eighth out of 189 countries in terms of ease of paying taxes.
6. The tax authorities turned a blind eye to tax evasion
The Commission concluded that the number of criminal proceedings that have been opened regarding tax evasion has not yielded positive results. “As a result, facts of organizing tax evasion schemes, including by criminal groups, remain unpunished.” 16 regional departments of the State Fiscal Service out of 24 have not registered a single criminal proceeding for tax evasion.
7. The tax service continued to protect the schemes
The commission’s report speaks in sufficient detail about the “protection schemes” of tax evasion and fictitious business schemes, including by operational and investigative units.
“All the work of operational and investigative units comes down to a formal examination of the legal address, which affects the quality of the evidence base for the illegal activities of enterprises.”
“The analysis of reporting established that only in 8% of cases the tax police units enter information on criminal proceedings under Article 205 of the Criminal Code “Fictitious Entrepreneurship” into the Unified State Register.
8. The fight against corruption within the State Fiscal Service has failed
In violation of the law of Ukraine “On the principles of preventing and combating corruption,” the State Fiscal Service was unable to create an internal security service that should check the timely submission of declarations, the presence of conflicts of interest, and the like. In fact, the State Fiscal Service did not even try to create such a structural unit.
“It should be noted that compared to 2013, the total number of preventive activities has decreased,” according to the report’s findings.
Of the 364 reports of possible tax violations received by the hotline, only three resulted in criminal proceedings being opened in 2014 – that is, in less than 1% of cases. Another 19 people were disciplined, and 62 people were “issued official warnings” about the inadmissibility of actions that could lead to corruption.
“The effectiveness of the fight against corruption in the State Fiscal Service bodies during the period under study can be characterized as insufficient,” the report says.
9. Illegal trade in excisable goods is in full bloom
All schemes for the illegal production and circulation of illegal excisable goods remain. For example, there are underground workshops producing counterfeit alcoholic beverages.
In the tobacco trade, the most popular remained the “interrupted transit” scheme, when containers with cigarettes are imported through ports, which are supposedly intended for business structures in Moldova or Transnistria. But in reality the goods “settled” in Ukraine.
Cars continued to be imported under the guise of spare parts; petroleum products – imported by tankers and cleared through customs only a small volume from tankers, from which taxes were paid. The rest were cleared through customs “in gray”.
Moreover, parts of the territory of the Donetsk region that are not controlled by the central government have become Ukraine’s own “Transnistria” – that is, a territory where illegal production and smuggling of excisable goods flourishes. Some of this smuggling is detected by Ukrainian tax authorities and criminal cases are initiated.
10. The tax service is unable to investigate criminal cases.
A very small percentage of criminal cases handled by the tax authorities reach the court with an indictment. In the period from June 1, 2014 to February 28, 2015, this share was only 6%. In general, for 2014 it was 10%.
The tax police in general seem to be eating their bread for nothing. “The economic effect of the activities of the operational units of the tax police is generally scanty,” the commission’s report says.
These conclusions are described in detail in the report of the official investigation into the activities of the Fiscal Service under the leadership of Igor Belous and his deputies Vladimir Khomenko and Anatoly Makarenko. Based on the results of the investigation, the Cabinet of Ministers fired the deputies, but Igor Bilous was allowed to leave “of his own free will.”
The appointment of Igor Belous as chairman of the State Property Fund was supported by the Verkhovna Rada Committee on Economic Development, headed by Andrei Ivanchuk, an associate of Prime Minister Arseniy Yatsenyuk.
Radio «Freedom»
Translated and edited by SKELET-info