Round table “Quality Regulation: Fight Against Illicit Trade” Was Held in Kyiv

December 18, 2018
Round table “Quality Regulation: Fight Against Illicit Trade” Was Held in Kyiv

On December 6, representatives of business and government discussed the issues of combating illicit trade: the key obstacles that hinder the fight against this phenomenon, what is the current situation and how the legal Ukrainian business sees the solutions of the problem.

Among the speakers were Vadym Poyarkov, Deputy Head of the Security Service of Ukraine, representatives of the State Fiscal Service Oleksii Sivirin, Andriy Shcherbak, Volodymyr Tarapata, Serhii Storozhenko, Representative of the Department of National Economy of the National Police of Ukraine Ruslan Strembitskyi, Anti-Illicit Trade Operations Eastern Europe Director of JTI Eugenijus Cikockas, founder of the Tekstyl-Contact Company Oleksandr Sokolovskyi, INTERTOP CEO Sergey Badritdinov, expert of CASE Ukraine Andriy Savarets.

Sergei Badritdinov voiced the issue of retail at the meeting. He noted that today there are two main problems in the industry: the cost of imported goods is drastically underestimated, and fiscal checks during the sale of goods are given not by all companies. The solution to this problem lies in the total fiscal consolidation that the Union of Ukrainian Entrepreneurs advocates and access to customs information.

“We need to open business access to impersonal information about the customs value of the goods. Under these conditions, business will be able to have real information and thereby help law enforcement agencies to detect violations and abuses, as legal business is interested in equal rules and conditions of conduct”, — said the CEO of INTERTOP.

Illegal trade is also a big problem for the tobacco industry. As the excise tax rates increase and, accordingly, the cost of cigarettes, consumers begin to buy illegal products more often. In addition, the competent authorities do not react to the fact that there are inappropriate players in the market who produce a counterfeit when the outflow of a legal product takes place, and pseudo-destruction of cigarettes has become a separate commercial business.

Losses from illicit trade of cigarettes are increasing every year. According to KPMG, Ukraine is the number 1 supplier of illegal cigarettes to Europe. Annually about 500 cargoes with cigarettes are exported from Ukraine illegally, which is about 250 million EUR annually in illegal circulation. Eugenijus Cikockas sees the solution to this problem in combining the efforts of business, government, and society and using the best world practices: “The first step in the fight against the phenomenon of illicit trade in the tobacco industry should be the adoption and implementation of a plan with measures for the implementation of the Strategy in the field the counteraction to the illegal production and circulation of tobacco products, which was approved by the Cabinet of Ministers. In addition, it is necessary to implement a general tracking system of manufactured products in Ukraine (Track & Trace)”.

Deputy Head of the SSU Vadym Poyarkov also agreed with this: “We do not need to invent anything — just take the experience of our EU neighbours and minimize the participation of the human factor in the control of export-import operations — technically equip the border to control the import and export of products”.

According to Oleksandr Sokolovskyi, a few years ago smuggling for textile business was expensive: in fact, the value of a container of smuggling was equal to the price of “white” customs clearance. This was related to the fact that at that time there were not so many operators involved in smuggling. Today the situation is the opposite — at the exhibitions of light industry, we can see not only one advertisement of logistics companies engaged in the transportation of illegal goods. Therefore, the activities of the relevant structures should be aimed at combating such business representatives.

“It’s hard for a legal business today to compete with illegal sellers. Taxes paid by one of the representatives of the illegal business are equal to the taxes paid by our company with less than 100 times turnover. Economic growth up to 3 % a year is stagnation, we need growth of 7–10 %. Companies that come out of the shadows can provide this growth. And in this fight we definitely will not be able to speak out alone — we need the help of the state and services, which representatives are present at the meeting today”, — he summed up.

During the discussion participants repeatedly returned to the issue of criminalization of smuggling. According to some business representatives, smuggling still has to become a criminal offense and should be investigated by the competent authorities. “To ensure that our service is conducive to high-quality and effective work, the criminalization of smuggling is necessary. We should have the same powers, which customs authorities in other countries are endowed with. Today, our anti-smuggling units do not have any operational capabilities in combating criminal offenses”, — Oleksii Sivirin emphasized the necessity of criminalizing smuggling.

The introduction of criminal liability for the illegal import or export of goods can become one of the tools to combat this phenomenon. However, it is worth focusing on other steps that will help overcome smuggling and illegal trade:

  • Electronic document circulation
  • Open access to impersonal information about the customs value of the goods
  • More specific, strategic vision of the problem from the authorities

In addition, even within the framework of the current legislation, these phenomena can be countered today. Therefore, the participants of the discussion agreed that only joint efforts can accelerate real results, including the legislative field, where today it is also necessary to make a lot of changes.

Also, authorities during the meeting called on business to cooperate.

“If you have information about unscrupulous players in the market, give it to us directly. Having received information from you, we will be able to work on the solution of the problem further”, — said Oleksii Sivirin.

Illicit trade is simultaneously a crime, a negative social phenomenon, and an economic phenomenon. Overcoming of it requires a synergy between the authorities, businesses, and citizens. And compliance with the law, prosecution for its violation, quality regulation of the economy and civil intolerance to illegal trade will minimize its manifestations. So, we continue to establish a permanent, and most importantly, productive dialogue with the authorities in this direction.

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