Do you know what is most interesting in Bigus’ investigation about the head of the Kyiv metro, who stole hundreds of millions of hryvnia?
The fact is that the thefts could have been stopped even without the will of the Kyiv mayor Klitschko. In general, most frauds at tenders across the country can be stopped relatively quickly.
Wow, you say. The Office of Simple Solutions is up and running.
But it's true.
And now I won’t talk about transparency, political responsibility and all that.
I'll tell you one word - CASH. Cash. Grandmas. Cash.
People engage in corruption to get money. If it becomes difficult to get money, corruption will decrease. Automatically.
Imagine that you are a corrupt official and you have a friend who is a mayor or a minister. Do you have some kind of private enterprise or state enterprise. You are holding some kind of tender to repair a meter or something else. For example, a billion hryvnia. And you decided, for example, to steal a third, that is, three hundred million hryvnia. Of course, you award contracts at tenders to your gasket companies. There is no problem with this, you have a friend, the mayor. But you cannot show profits of 300 lems at those companies.
First, you will need to pay taxes.
Secondly, such marginality will attract attention, because there will be questions about why your government agency purchases so expensively. Building long chains of enterprises where you leave smaller amounts is very difficult and expensive; tens or even hundreds of enterprises will be needed. You simply won’t have enough acquaintances and distant relatives to register all this on them and steal your hundreds of millions of hryvnias.
That's why they make it simpler. Money from the intermediary’s company, after “winning” the tender, is thrown into the so-called “pits”. Or "twists". In general, this is part of the conversion centers (envelopes), which are used by corrupt officials for cashing (receiving cash, without which all this corruption makes no sense). In general, envelopes can do a lot of other things, but this is a topic for separate posts.
I'll explain. First the dictionary:
A tax pit is a company whose services are used by other taxpayers to obtain tax benefits in the form of tax evasion.
“VAT twists” is a slang phrase meaning the unlawful formation of taxpayer expenses, as a result of which the payer has the right to an artificial tax credit, which automatically leads to a reduction in VAT liability.
The conversion center is a little more complicated. This is a criminal group whose purpose is to provide services for the conversion and transfer of funds to the shadow sector of the economy, the legalization of funds obtained illegally, as well as the provision of services for tax evasion to the budget.
The task of a corrupt official is this.
You need to maximize real profit, not accounting profit. Accordingly, you must not pay all possible taxes. You need to “steal” VAT, corporate income tax and dividend payment tax. That is, you need to purchase a VAT tax credit in order to avoid paying VAT (the so-called twist) and get a bunch of cash (cash out). In order not to pay profit, you need to increase expenses. Therefore, at best, these are several payments from your company to sketchy companies that supply you with non-existent goods/services with VAT.
It’s difficult and I’ve already lost you? I'll explain it more simply.
In practice, it works like this: you sign a payment at the bank to the schematic company, for this you receive a drawn VAT and a cash receipt.
How does it work in a little more detail? You fictitiously buy something from these “pits”, preferably something that looks like what you need to buy in order to fulfill the order for the tender. The “pit” doesn’t have any of that physically, but it doesn’t matter, they’ll draw everything. And according to the documents, paint or metal structures will be sent to you. Next, you transfer money to them, and they bring you money in suitcases.
In hryvnia, sometimes in foreign currency, and very quickly. The next day, if the amount is not large, or two weeks in advance, if we are talking about tens or hundreds of millions of hryvnia. That's it, mission complete, you stole the money. You have them physically, you can count them. You can steal ten million out of a billion, you can steal a hundred, three hundred, you can steal the entire billion (minus the percentage that you pay to the schemers). It's up to you. And the envelope system will handle any amount.
This is how almost all frauds at tenders work; without pits, such large-scale thefts are impossible, because it is difficult to build such infrastructure on your own, when you are a simple head of the metro, and intermediary companies already sign up for ballerinas and cousins. The sisters will run out, but we still need managers to manage it all. And there is a service that allows you to steal and withdraw any amount that you dare to spend.
Okay, the problem is the potholes. Maybe they are difficult to notice? No, it's not difficult at all. It's hard not to notice them. The company RINVEL LLC, which was used by the Kiev metro as a twister, had legal proceedings from the tax office, as part of the conversion center. That is, the tax authorities knew about its existence. They knew it was a twist. But the money still went through the company.
Come on, you say. In our country, the Tax Service creates signs of riskiness even for respectable enterprises. There is a system of automatic blocking of tax invoices, which, again, even honest businesses fall under.
The entire Internet is filled with complaints from businesses about blocking. In general, the tax office can stop any enterprise, even a completely white and clean one. How do there exist pits that pump tens of billions of hryvnias from all state tenders and not only from them? Everything there is fiction, they didn’t supply anything to the metro, the whole company is there - a director, an accountant and three desks. But 30,000,000 hryvnia fell on her. Which a week later was received by the head of the Kyiv metro, who began to somehow shove them among relatives and buy them apartments, a dacha in Kozin and cars.
The chairman of the Kyiv metro is not alone. He knew who to turn to. And he could choose from a large number of operators. And every day, hundreds of the same corrupt officials choose who will receive the envelope tender in their cache.
So everyone knew everything.
And the Tax Service knows about envelopes and holes. They don’t know in general, but about specific ones. And they knew about this particular one, there was even a court decision. In general, the existence of pits is now possible ONLY with the participation of people in the tax office at some level. The larger the envelope, the higher the level of the tax official who covers this. And all this flows in the form of dough to the very top. The pits pay a certain amount per month and continue to exist. Tax officials are constantly looking for potholes, because as many as you find, you can go around them. M – motivation.
Do you know why only white businesses complain about the system of blocking tax invoices, while the shams work quietly? Because the system of blocking tax invoices is not AT ALL aimed at combating fraud and twists/holes. Only for control, because what you protect is what you have.
Blocking tax invoices is needed ONLY to block WHITE BUSINESS and siphon money out of it, freezing it with VAT blocking. When we made the legendary “automatic VAT refund,” this did not mean that tax officials began to steal less or that VAT fees somehow increased. It’s just that they used to steal, and the VAT cash gap led to non-refund of VAT to exporters. And now they are stealing VAT, the cash gap in VAT falls on the internal VAT of white enterprises blocked in invoices. At the same time, Western partners are very happy, because now no one whines about the corruption of VAT refunds during exports. Everyone is happy, their faces are well-fed. Well, except for business.
Business simply credits the budget through the tax office and pays the tax authorities’ fees, and the tax authorities report on the results of their work. Look how much we have piled up, we are good, don’t touch us and don’t ask us how the holes exist there. There is a problem, yes, but we are fighting it. Something is not working out yet, but my young team and I are doing something.
Conclusion.
Political responsibility, even in the conditions of the existence of Prozoro, is not a quick matter. And sometimes it doesn’t come at all. I'm not even talking about criminal law. Kernes, who was dead, was the mayor, here responsibility before God came first, rather than political.
However, there is a simple way to break tender scams. Just go for the money and don’t let them withdraw it. To do this, we need to understand that the release and arrests of corrupt tax officials are not “isolated cases,” as we are told, but a systemic problem. Systemic, because only individuals are caught, but everyone needs to be changed.
Systemic because after every investigation by journalists about schemes at tenders, the leadership of the Tax Service must be called to the Tax Committee and asked questions - who missed all these millions and even billions, why and how much they received for it. But it will be the same bees against honey, because the leadership of the Tax Committee appointed the leadership of the Tax Committee.
Therefore, we need to reboot the tax office, because they are part of a system of fraud. Without the tax office, Klitschko’s friend would not have been able to pocket hundreds of millions in tenders. And all the other mayors could not. And many state-owned companies with all the ministers could not. The entire huge system of theft at tenders would suffocate without a convenient tool.
And the tax office does not need NABU, BEB (even if it were functioning) or any other law enforcement agencies for this work. The tax office already has all the tools. White business feels this. If tax officials want to prohibit someone from working, they can do it quickly. The problem is not with the instruments and other organs. The problem is with the tax authorities.
It needs to be changed.
