Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Customs Cheaters Enjoying Fruitful Heyday




The State Tax Service has had four chiefs in the last two years because of government leaders' consistent unhappiness with the level of tax collection.


By contrast, the State Customs Committee has had just two chiefs in the last two years, making it a veritable bastion of stability in a country where governments can change three times a year.


Last year, customs collected $12.3 billion in revenue for the federal budget. No groans about that figure were heard from the State Duma or the International Monetary Fund, which have both decried Russia's low level of domestic tax collection.


But if you listen to people whose job it is to investigate customs abuses, there should have been an outcry.


According to the Customs Committee, $52.9 billion worth of goods was imported into Russia in 1997. But this is only a fraction of the real figure, experts say.


According to Yusup Kasayev, head of the law enforcement department at Moscow Transport Prosecutor's Office, many of the imports simply disappear in the vast Russian hinterland after legally crossing the border. They are never cleared by the internal customs checkpoints and they cannot be traced. Other goods are cleared by the domestic checkpoints at a much smaller value than the one declared on entrance to Russia.


Experts say the lack of efficient communications between the border checkpoints and the domestic ones makes import statistics utterly worthless.


"No one can tell what Russia's real import volume really is," Kasayev said.


State Customs Committee chief Valery Draganov said last month that so far this year, smuggling has increased 80 percent.


Smugglers are especially active in the import of drugs, cars, furniture, electronics, alcohol and tobacco, he added.


Sergei Pekhterev, a top investigator with Moscow's transport police, said he had information that several Moscow companies were using two military airfields near Moscow to smuggle Bulgarian cigarettes. But he could not check out the lead because transport police have no access to military facilities.


A spokesman for the Defense Ministry would not comment on Pekhterev's claims.


But even if customs inspectors were more adept at catching smugglers, their service would still be unable to bring in the revenues to which the Russian budget is entitled by law. The customs committee is unable - or, some would say, unwilling - to cope with more subtle techniques for cheating on import and export levies.


"I believe roughly 80 percent of the importers declare only between 10 percent and 50 percent of the true cost of their goods," Kasayev said.


According to Kasayev, the Moscow Transport Prosecutor's Office this year opened 321 criminal cases against companies that have underdeclared the cost of imports. Not one of these cases has reached the courts.


"We simply cannot find anyone to prosecute," Kasayev said. "The firms that clear the imports at domestic customs checkpoints are created just for one day. Their founders use dead people's passports, lost passports and stolen passports to register these companies."


The investigator said his office recently tried to locate a company that cleared 1,000 tons of German cheese at a fraction of its real price. No traces of the firm were found.


Importers say the reason so many of them cheat on their declarations is that Russian customs duties are prohibitively high.


"Thousands of companies involved in the business of getting their goods across the Russian borders are looking for the ways to reduce their expenses in order to make their goods competitive," said the director of a St. Petersburg-based company that imports construction materials.


Many importers leave the declaration troubles to customs brokers, who are quite deft at reducing costs.


"These brokers make out declarations that look fine and legal," said an expatriate manager with a large Moscow-based forwarding company, who spoke on condition of anonymity. "But, say, a trailer with electronic goods, which may cost about $60,000 to clear if it is done honestly, is being cleared by the brokers for just a tenth of the charge."


Customs agents at domestic checkpoints often extort bribes of about $5,000 per load by threatening to check every detail of importers' declarations, the forwarding company manager said.


"But that is still less than the full $60,000 or $70,000 that you would have to pay otherwise," he added.


Draganov confirmed at a recent news conference that bribery was rampant in his committee, and officers at several checkpoints in the Moscow region are now under investigation.


Exporters are also routinely underdeclaring the cost of their goods to beat high tariffs. That goes even for major state-controlled companies.


Russia's diamond monopoly, Alrosa, was caught last year declaring a batch of uncut diamonds for export to South Africa's De Beers company at 75 percent of the real price. If successful, Alrosa would have saved $32.5 million on the deal.


Alexei Remizov, a top investigator with Moscow's transport police, said there was no criminal investigation after the company was caught red-handed. The government simply worked out a deal with Alrosa whereby the diamond producer paid the full amount of duties and was allowed to get off scot-free.