How to get rid of rot in state customs service
LVIV, Ukraine – Will there finally be a crackdown on Ukraine’s corrupt customs service?
Ukrainian Prime Minister Volodymyr Groysman, appointed on April 14, is promising one. He has declared it a priority to end abuses and overhaul the State Customs Service, which is part of the State Fiscal Service.
Smuggling, bribes paid to cut import duties, opaque pricing of customs clearance – all these have long plagued the country’s customs service, draining billions of dollars from Ukraine's official economy into the shadows.
"We currently have enormous challenges with customs, which on the one hand cater for the needs of the shadow economy, and on the other hand hinder the development of our domestic producers,” Groysman said in a video message posted recently on his Facebook page.
To carry out the cleanup, Groysman has introduced 20 mobile groups of border guards, dubbed the Black Hundred, whose members come from the National AntiCorruption Bureau, the National Police and the State Fiscal Service. These roving units are tasked with uncovering gray and black smuggling schemes.
The fee for land (the land tax or land lease fee in the case of lease of public land) is established proportionally to the normative valuation of a respective land parcel. The reports from business of a drastic increase in the normative valuation of land represent a threatening tendency. As a result of the revised valuations, made unilaterally by local authorities, the fees for leasing public land are increasing significantly (up to 45 times in some cases known to us!) without the agreement of the lessor, and these increases are being upheld in the courts. Doing business in such explosive conditions is a challenge. How can these risks be prevented, or at least made more manageable?
As the land fee is becoming a real issue for businesses, it’s worth paying special attention to the following action points: • monitor the regulatory activity of local councils (the earlier the issue is
identified, the easier it is to prevent the approval of unfair land valuations); • obtain full information on technical documents for land via various requests (usually considerable effort is needed, because the authorities tend to refuse such requests if possible); • identify risks in the lease agreement or in technical documents for the
land plot, which may lead to overpricing; • determine if there are flaws in decisions to approve new normative
valuations of land; • gain additional time for negotiations or postponing negative changes in
valuations, if they are inevitable. Decisions taken on new normative valuation are quite often issued with errors, including procedural and material ones, which allows unjust land valuations to be challenged and nullified. Although the acts on new normative valuations usually affect a whole city or area (i.e., are qualified as regulatory acts) they are quite rarely done in full compliance with respective procedure. The applicable procedure envisages that the effected parties be given the possibility to study drafts and offer their own proposals. However, as a matter of general practice, land users are usually merely notified about the new value post-factum. In other cases, which are quite common, valuations are done not for a whole area, but rather for an individual plot. Such a practice discriminates against 'unlucky' tenants, who become obliged to pay rent dozens of times higher than average. Determining if there are material defects in technical documents includes a careful analysis of each applied coefficient used in calculating the new normative value of the land. Numerous cases show that responsible officials prefer to use opaque mechanisms, which allow arbitrary manipulations of land value. For example, the key component of the normative value of land is municipal expenses on local infrastructure. Even in the absence of any real infrastructure improvements, the declared amounts can be huge, which results in an unfair land value. It’s not just at the local level that there is a lack of consistency in normative valuations of land. For instance, an order approved by the government in 2013 on the procedure for valuing land contains a coefficient according to which land in peripheral provinces have an “urban development value” that is five (!) times higher than land in the suburbs of megalopolises like Kyiv or Odesa. A new regulatory approach is definitely needed in order to bring stability and confidence to business environment. But until a new regulation is in place, such cases will have to be dealt with on an individual basis. As payment for land (the land tax and the fee for leasing public land) is considered a tax, the normative value is the tax base, i.e., element of the tax, and this element may be established only with strict compliance with the tax law as well. Judicial practice has already confirmed (and is even now directly stipulated in the Tax Code) that establishing a new land value has to be done and announced publicly before July 15 of the year preceding the one during which it shall be applied, i.e., in the same way as for other local taxes. Respectively, there should be some time allocated to adapting to the new base, and to challenging unfair land valuations, if the land user choses to do so. Current practice shows that by taking this approach, there is every chance of succeeding in keeping normative valuations at a reasonable level.
A customs officer checks a car with smuggled cigarettes stopped on Ukraine's western Zakarpattya border on May 10. (zak.sfs.gov.ua)