Report: Illegal importation of IT-related products causes huge losses to Ukrainian budget

Last week the analytical firm IDC reported that losses in potential VAT revenue from the illegal importation of IT-related products, such as tablets, laptops, and phones from $233 million in 2013. Moreover, this figure does not take into account the related losses borne by the state when refunding nonexistent VAT to unscrupulous importers.

For the first half of 2014, losses to the budget decreased following a lower amount of  equipment imported and a slight decrease in the illegal importation of equipment.

While in 2013, the total customs value of imported laptops, tablets, and phones totaled 40.5% of all sales, this figure has increased to 45.5% of sales in 2014. Thus, IDC reports that budget shortcomings for the first half of 2014 has totaled only $58 million.

“Notebooks, tablets, and phones/smartphones are the electronic products most widely imported illegally to avoid VAT,” says Vladimir Pozdnyakov, head of the IDC Kiev office. “If we consider the other categories of electronic equipment regularly imported to Ukraine, such as printers, servers, data storage systems, monitors, uninterruptible power supply, network equipment, etc., the total value of underpayments in VAT last year exceeded $300 million.”

Considering the extent of the grey economy, observers underline the urgent need for customs and tax reforms, which they see as one of the first steps towards the establishment of the rule of law in Ukraine.

Ukraine ICT market 2013_IDC

Sources: IDC, KO.COM.UA

Topics: Data & reports, International, Legal, Policy making, Taxes
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