In the third quarter of 2023, operational taxes, such as VAT, income tax (IPT), wages and others, paid by almost 50 leading players in the fuel market amounted to UAH 1.485 billion. This is one and a half times more than in the second quarter (UAH 0.937 billion). The main factor contributing to the increase in revenue was the increase in VAT from UAH 174 million to UAH 533 million. (Okay, but it’s worth remembering that from July 1, 2023, VAT increased from 7 to 20%.) However, the amount of income tax remained almost unchanged: UAH 300 million compared to UAH 271 million in the previous quarter. Almost 30 out of 50 gas station networks showed insignificant profitability, that is, they operated at a minimum profit level or even at a loss in order to simply recoup their expenses.
There is money!
But the absurdity of non-profit reports is easy to refute. As always, the OKKO company “spoils” the picture here. With 26% of sales (in the third quarter of 2023), the network paid 75% of the income tax among the largest players (see Fig. 1). In numbers, this is 1.1 UAH/l, that is, the tax base was a profit of 6 UAH/l, which corresponds to market realities, namely the difference between the purchase (wholesale) and retail cost of fuel minus VAT and operating costs. In general, Vitaly Antonov’s network improved its tax burden indicator during the quarter from 2.39 to 2.49 UAH/l.
It should be noted that the purchase price of fuel from the main players is approximately the same, since they are predominantly direct importers. The selling price at the pumps is different, but if we take into account the well-known discounts, increased operating costs of “premium” networks, etc., the bottom line is that the difference in selling prices and, accordingly, in the markup is 2-3 UAH, and not 4-5 times .
“The margin is amazing,” this is how the head of Ukrnafta, Sergei Koretsky, characterizes the current profitability of the fuel retail trade. At the same time, we note that the state network trades at almost the minimum prices on the market.
For example, the Socar group in Ukraine was unprofitable in the third quarter of 2023. If the group had placed its quarterly turnover of UAH 5.7 billion on deposit in a Ukrainian bank, it would have earned UAH 171 million in profit, and in the nine months of 2023 - more than half a billion hryvnia. Instead, as existing tax indicators show, during this period the state-owned Azerbaijani company received UAH 3.85 million in profit... At the same time, it was for Socar that the maximum result in terms of tax burden for the first nine months of 2023 was 3.03 UAH/l ( see Fig. 2). The analysis shows that this figure was achieved thanks to good wage rates and payment of VAT, which is generated by Socar's wholesale chains, significantly increasing activity in the second half of the year.
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Expectations from the nationalized Glusco network, managed by NJSC Naftogaz of Ukraine, did not materialize. It never posted a profit in the third quarter. We can only wait for the announced transfer of Glusco under the roof of Ukrnafta; now the word is up to the Antimonopoly Committee.
Point victories
If the leading positions of OKKO and Socar are no longer news, then the rise of BRSM in the third quarter can certainly be considered a sensation. Consequently, if in the first half of 2023 the network paid an average of UAH 7 million in VAT, then in the third quarter - as much as UAH 298 million! How?
Back in August, it became known that the tax authorities “convinced” the Belarusian Republican Youth Union to pay UAH 200 million in VAT on account of “old exploits.” At the same time, the quarterly figure for non-refinery products has tripled and the payment of excise duty on mixed alcohol-containing gasolines, which the Belarusian Republican Youth Union produces at its mini-refineries, has more than tripled (it is not yet clear whether their production has increased, or the tax burden has grown to adequate levels). As a result, Andriy Biba’s chain over the quarter turned from an outsider in the tax rating to a leader: the tax burden increased from 0.46 UAH/l in the second quarter to 2.39 UAH. “Credit” for nine months - 1.21 UAH/l.
Another hero of the quarter was the Avantage 7 chain, a long-term outsider in the tax ratings. Let us remind you that in the second quarter of 2023 the company showed a result of minus 42 kopecks/l. That is, the budget still had to pay extra. Suddenly, in early October, the tax authorities suddenly canceled 53 retail licenses for Avantage stations, and they were forced to stop.
According to existing data, mutual understanding has now been reached, the company has even paid the first “voluntary” contributions to government accounts in advance. True, it will be possible to verify this already based on the results of the fourth quarter, but for now Avantage 7 continues to maintain the minimum tax burden for the nine months of 2023.
Judging by some “breakthroughs” in the statistics of individual players, we can say that tax officials have carried out thematic work on several regional networks. Fuel sellers were on the list of priority categories for inspections. Many companies report extensive audits spanning the last seven years.
There is still room for exploits
The tax burden has increased in all major networks, but significant differences in the fiscal burden continue to persist. Obviously, UPG has the greatest potential - the most efficient network in terms of sales volumes through one gas station.
Undoubtedly, there may be more KLO, whose business is concentrated in the most liquid market in the country - the capital. This is also evidenced by the indicators of the remainder of the Privat group on the market, which, however, together form the largest network in the country with almost 900 stations (ANP, Avias and others brands). Having four times less sales per station than KLO, the Privatovites have a greater tax result. Although it is obviously insufficient.
Against the backdrop of a general increase in the tax burden, more and more questions arise regarding the VST and MOTTO networks. VST indicators in the third quarter of 2023 looked good, taking into account excise taxes on homemade fuel, which is “cooked” by the well-known company Sun Oil at its mini-refineries. By the way, like the BRSM, excise tax payments for the quarter increased almost fourfold - to UAH 50 million. But, firstly, the excise tax is not an operating tax, and secondly, back in 2021, the lease of the VST network by Sun Oil structures was terminated .
MOTTO fell into the abyss, however, it was picked up by the once powerful Parallel: it was stated that the latter would take over the supply of fuel for MOTTO. There is talk on the market about further integration of the two networks, which should also affect MOTTO’s tax indicators. By the way, Parallel, a small network of 22 gas stations located in the dilapidated Donbass, showed a load of 1.95 UAH/l in the third quarter.
Indicator of change
Can you imagine that Uklon drivers earn two to three times less than UBER? It would seem that this is impossible, but we can see precisely such miracles in the reporting of gas stations (see Fig. 3).
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An idea of the real level of salaries in this industry can be formed based on the indicators of the five leading networks - UAH 22,254 (including personal income tax), or UAH 18,248 “in hand.” At the same time, on the other side of the “tournament” table we see salaries of 10.7 and even 3 thousand UAH per month inclusive of personal income tax.
What does this mean? The first obvious conclusion is that the owners “optimize” salary taxes. Second and more important, these businesses operate schemes to evade income tax and VAT. After all, workers are paid cash in addition to market wages and even higher.
For example, if, according to the State Tax Service, the Belarusian Republican Youth Union has 3,647 employees with an average salary of 8,536 UAH (including personal income tax), then in order to provide a salary in hand, like the top five companies, the need for cash is more than 41 million UAH (imagine get yourself these bags of banknotes). Avantage 7, according to similar calculations, requires cache in the amount of 9 million UAH per month.
Where does cash usually come from? “Twisting” with the help of “tax pits”, trading without issuing a cash receipt or manipulating checks, etc. And there is complete confidence that this scheme is not limited to the need for cache to pay employee benefits. After all, there is no point in taking risks “for pennies.”
The third conclusion: by leaving such a mess with salaries, business owners show their real readiness to correct the payment of taxes in general. They are waiting for the tax authorities to change their focus so they can return to the old schemes. And if VAT can be paid depending on the situation, then this will not work with salaries: if you raise them once, it will be impossible to rewind them. Therefore, the analysis of official wage rates should become an important area of attention for tax specialists. This is a thread that can lead to larger-scale results than non-payment of personal income tax and unified social tax.
Drones and body armor
“Whoever does not pay taxes steals from the army,” this is how the head of the tax committee of parliament, Daniil Getmantsev, described the current situation. This is actually the same as stealing from the state budget, which those market players who have a minimal tax burden like to resent in private conversations.
How much does the treasury lose on the retail fuel market? If we take 2.07 UAH/l as an indicator—the average value for the five leaders—then the losses will amount to about 9 billion UAH. Yes, this money will not solve all problems, but how many turnstiles, drones, body armor are there?
What to do about it? First of all, there must be persistent work by tax officials. There are many complaints from the market about the human factor, incomprehensible requirements, which obviously arise due to the lack of clear guidelines for planning the tax burden. This requires a lot of analytical work, because there are good cases on the market for building a transparent business, which should become guidelines for tax authorities and the market. The mentioned 2 UAH/l is the minimum, which is currently visible from all sides. And this should be communicated to business. We need to start with payroll taxes.
Another important element should be the openness of data on the payment of taxes by oil traders. This provision, by the way, is in the legislation, but for formal reasons it is not implemented. Well, what kind of military secret does tax payment statistics represent? By the way, the publicity of this data will help evaluate the work of both the State Tax Service and businesses.
Yes, there are successes. But has the goal of paying taxes in full been achieved? No.
