The State Fiscal Service conducted searches in the stores and warehouses of Vsi Svoi, a chain of stores that sells Ukrainian-made goods, on June 23.
The officials suspect the company of almost Hr 9 million ($326,600) tax evasion during 2018-2021 years through the fraud scheme involving the registration of fictitious individual entrepreneurs. Vsi Svoi denies the accusations.
Vsi Svoi owns four stores in Kyiv that sell Ukrainian-made clothing, accessories, and home decor, including two stores on the city’s main Khreshchatyk Street. The company also hosts weekly markets in central Kyiv.
According to the Fiscal Service, Vsi Svoi wasn’t filling in accounting and tax reports properly. The marketplace reported less than Hr 1 million in annual revenue while the real revenue reached Hr 120 million per year, the officials say.
Vsi Svoi denies accusations, saying that it reported Hr 15.8 million annual revenue in 2020.
Moreover, Vsi Svoi claims it didn’t evade taxes. Its statement reads that the company works as a marketplace, or an intermediary between producers – who are actually registered as individual entrepreneurs – and consumers.
“When a buyer makes a purchase, part of the money goes to the marketplace for the intermediary service, and the rest of the money is transferred to the manufacturer or to the seller from the manufacturer,” Tetyana Fishchuk, spokesperson for Vsi Svoi, wrote to the Kyiv Post.
This is apparently what the Fiscal Service saw as a violation.
According to Fishchuk, while the marketplace Vsi Svoi (registered under the company name Riksten) pays all the relevant taxes, manufacturers that Vsi Svoi works with are registered as individual entrepreneurs, Fishchuk said.
“Since they (Fiscal Service) saw ties with individual entrepreneurs in our reports, they thought we had created a tax evasion scheme,” Fishchuk said.
Vsi Svoi says that its lawyers will challenge the Fiscal Service’s accusations, and will go to court if needed.
Experts say that the sides’ statements aren’t enough to understand whether there indeed was a violation.
“The Ukrainian legislation allows the sale of goods through intermediaries,” Ivan Maryniuk, a lawyer at Ilyashev & Partners Law Firm, wrote to the Kyiv Post.
Ukrainian businesses don’t shy away from tax evasion. By different estimates, at least a quarter of the Ukrainian economy is in the shadows, although Danil Getmantsev, the head of the parliament’s finance and tax committee, believes it’s closer to one-half.
Getmantsev estimates that no more than 5% of Ukrainian companies work without any fiscal violations. That’s why he backed a law that introduces obligatory cash registers for certain groups of individual entrepreneurs, or FOPs as they are usually called in Ukrainian, starting in 2022.
