Экономические науки/Государственное регулирование экономики

Петрачкова М.И., Романенко Т.Л

Донецкий национальный университет экономики и торговли

им. М. Туган- Барановского, Украина

_{THE INFRASTRUCTURE OF DECEIPT}

Every country has its share of crooks. In Ukrain, however, fictitious firms are not just examples of villains’ inventiveness but a business of its own.

This is a rather profitable business. Even recently, Ukrainian businessmen played "fictitious games" with gusto, using the fact that this term is still missing from Ukrainian law. However, these games have become dangerous of late because they lead to financial ruination rather than to minimisation of taxes. This is why the demand for modernisation of law has ripened and if earlier lobbyists had been slowing down the fight against fictitious business, they are in its favour now.

What is a fictitious firm? It is rather hard to answer this question in legal terms: Ukraine's laws do not define 'fictitious firms" and "fictitious trade and industry actors." The term was authored by taxmen, and we asked a source in the State Taxation Administration to decode it. According to our source's explanation, those are "commercial entities that conduct economic operations based on contractual and accounting documents that conceal their true goals and tasks."

Previously, it was mainly firms registered to lost passports and mentally ill people that were considered fictitious, as well as those using fake incorporation documents and stamps. At present, the definition of this phenomenon is much broader. In fact, what we are talking about is a sphere of illegal financial services meant to reimburse VAT at the expense of state budget, to convert capital into cash, to carry out schemes with securities and insurance (more accurately, export money using reinsurance), etc. Other methods include collecting money among population (for construction of housing, for instance) and even financial ruination by legal action and non-existing liability.

In order to make money, fictitious firms have to work with legally acting companies. There are two kinds of this teamwork: first, when the partner firm knows who they are dealing with and signs contracts with fictitious firms, for instance, in order to avoid taxation; second is when a legally acting firm is simply deceived.It is worth noting that because of drawbacks in legislation, an honest businessman suffers more than those who go for fictitious operations with intent. In the latter case, both the contract and its real sum are thoroughly disguised. What is more, a fictitious firm would get rather solid commission which it strives to substantiate.

However, real enterprises could quite often sign contracts with fictitious firms without any suspicion as to who they are really dealing with. Consequently, situations arise when such an enterprise could lose profit or even end up with a loss (not without some help from representatives of taxation bodies). In addition to this, when there is intention on the part of both sides, everything they gained as a result of the contract is collected for the state's income, And it is very hard to prove anyone's lack of knowledge. As a result, when the risk of exposure emerges, crooks vanish while law-abiding businessmen pay double. There are even cases when such people go before courts of justice. There also is another side of the coin. Since necessary definitions are not to be found within the law, the characteristics of fictftiousness can be determined in an arbitrary way, to someone's liking. Taxmen's attention to your firm can be caused by frequency and sums of payments uncharacteristic of previous periods, complaints by friendly competitors, contacts with organizations already within the sight of tax authorities, etc. This means that both guilty and completely innocent commercial structures can find themselves eagerly persecuted by law enforcers. It is not without reason that they say that "punishing innocents and honouring not involved" is a traditional "art" for Ukrainian reality.

So why the notion of "fictitious business" is missing from the Ukrainian legislation? And why this topic is a prerogative of taxmen? Experts think that there was no social demand within society for fighting this evil. Moreover, because legally acting business is interested in working with illegal business, and many fictitious firms were set up by the well-known banks (for conducting conversion transactions), industrial enterprises (to minimize profit tax), and companies involved in economic activities abroad (to engage in smuggling and reimbursement of VAT), they had put every hurdle possible in the way of making related legislation more strict.

The scheme is like this: crooks set up a fictitious company in Ukraine, sign a contract of servicing their accounts with a bank, and then pass on documents on their fictitious liabilities to similar fictitious to similarly fictitious "colleagues" abroad.

Then the documents go to a court of law along with the legal challenge. After the money had been taken out of the bank's account, it cannot claim anything from their clients because it is not there, it disappeared. Seven Ukrainian banks, including middle-sized and big ones, have already suffered from this scheme. All together, they were defrauded for several hundred thousand dollars.

This is just one bright example. In fact, there are many more ways of robbing a legally acting businessman with the help of fictitious businessmen. So, as financiers would put it, the business has ripened and is ready to suffocate with its own hands, the fictitious offspring that went out of control. For this, laws should be amended, and when there is demand, proposition will be found.

Relevant amendments are being developed, and the new Ukrainian parliament will soon adopt them. It is true, though, that fictitious firms' services will find demand for themselves until authorities agree to the need to reform the taxation system and create a transparent and straightforward fiscal field.