On February 9, VARES Association took part in the conference "Detinization of trade - "crushing", underestimation of turnover, salaries in "envelopes".

The topic: the massive use of FOP as a mechanism for fragmenting business - often in parts that look like systematic VAT and income tax evasion.

The key problem: there are no clearly established concepts and criteria of "crushing" in the legislation. As a result, interpretations become subjective, which creates the risk of erroneous decisions: both real small businesses and those who disguise large turnover can fall under the same category.

During the discussion, the participants discussed the transition from a punitive approach to a preventive approach:
- legally define the criteria;
- make them understandable for business;
- apply responsibility according to clear rules.
Detinization by sector:
- there is noticeable progress in some sectors: in particular in the fuel/oil refining sector, as well as among Internet providers and security services;
- at the same time, the tobacco industry causes concern: the drop in official revenues indicates the activation of the black market.

Traditionally, we looked at the results of detinization by sector. There are industries where progress is really strong – fuel/refining seems to be one of the best examples of systemic work paying off. There is also a positive trend in Internet providers and, according to reported data, in security services.

But the tobacco industry looks alarming: the fall in the share of official revenues is a signal that the black market is becoming more active.

Roman Kovalchuk's speech regarding the situation surrounding tobacco raw materials was particularly memorable. Even at the level of the logic of the supply chain, questions arise there: tobacco cultivation is recorded in Ukraine, while large tobacco companies, according to the information provided, almost do not purchase domestic raw materials.

VARES position. We emphasized that the electronic cigarette market has already been regulated several times without the systematic involvement of experts, which led to negative budgetary consequences. Attention was focused on the Internet channel as a platform where schemes are scaled quickly and with minimal costs. That is why VARES advocates a preventive approach: creating a system,
which will identify risky patterns so that they do not become the norm.

Thank you to the Ukrainian Business Council for organizing and creating a platform for discussions!