The VAT overuse scheme causing the state’s losses by 2 billion UAH per month was blocked

Press service of the State Tax Service of Ukraine, published 02 July 2020 at 23:48 Chapter: News

Security Service of Ukraine jointly with the Prosecutor General’s Office and the State Tax Service of Ukraine conducted a special operation to expose and block at the STS the illegal formation mechanism of the VAT tax credits for business entities. This scheme caused the state’s losses in the amount of more than 2 billion UAH per month during its existence in 2019-2020.

According to the Security Service of Ukraine:

- the pre-trial investigation exposed that the scheme involved officials of the State Fiscal Service (after the reorganization – the State Tax Service), its regional units and transit – conversion groups. In total it is about 400 business entities;

- the illegal formation of VAT tax credits was done, inter alia, through an unauthorized interference in the operation of information and telecommunication systems. Such interference distorted information processing. As a result, the state budget had losses in particularly large amounts;

- documents, computer equipment, flash drives and seals of about 60 companies involved in the scheme, as well as 1.5 million UAH in cash were seized as a result of more than 120 searches. More than 100 million UAH was seized from the bank accounts of these enterprises. In addition, funds on the payers’ accounts in the system of electronic VAT administration totaling 586.8 million UAH were blocked.

Currently, the joint work of the State Tax Service and the Security Service of Ukraine on destruction of the VAT scheme is based on the integrated approach:

- detection and termination of use of a fictitious tax credit formed with the use of forged tax invoices;

- establishing and prosecuting organizers of the tax evasion schemes;

- joint exposure of corrupt STS’s employees.

Implementation of this approach resulted in the receipt of additional 6.4 billion UAH of the VAT to the State Budget of Ukraine in May and June 2020.

Cooperation between the State Tax Service and the Security Service of Ukraine will be continued so that the positive result of counteraction against schematic VAT will become stable and systematic.

Amount of the VAT accrual (according to the May declaration) is 19.5 billion UAH which testifies the positive result.

This is almost 1 billion UAH more than in 2019 with a 20% reduction in supply. 

The VAT’s tax efficiency is 3.4% (currently it is a record for a year and a half).

In the future, joint work of the Security Service of Ukraine, the State Tax Service and the Ministry of Digital Transformation is envisaged, specifically to eliminate the shortcomings in the system’s operation and the introduction of comprehensive protection of electronic products in order to eliminate the human factor as much as possible.