Enhancing custom controls might generate an additional 300 billion rubles for the national budget, according to the head of the Federal Trade Commission.
The Federal Tax Service (FTS) of Russia has reported a significant increase in the detection of dishonest practices in foreign economic activity. By the end of 2024, the FTS detected violations totalling 56.4 billion rubles, a 58% increase from the previous year.
These unscrupulous practices, if left unchecked, create an unfavourable environment for honest businesses. The understatement of the value of imported goods leads to a reduction in customs and tax payments, giving dishonest market participants an unfair advantage.
The FTS has highlighted several common strategies used by these dishonest participants. These include under-invoicing, misclassification, false declaration of country of origin, falsifying documents, and round-tripping or artificial trade.
Under-invoicing involves declaring a lower value of imported goods than the actual transaction price to reduce the customs value basis for duties and taxes. Misclassification involves assigning incorrect customs codes or categories to goods that attract lower tariffs or taxes. False declarations by classification code and cases of illegal turnover have also been reported.
Falsifying documents includes providing counterfeit or manipulated shipping and commercial documents to disguise the true nature or value of goods. Round-tripping or artificial trade involves creating fictitious transactions or routing goods through intermediary countries to exploit loopholes and pay less duty.
These strategies effectively reduce the customs value and thus the payable customs duties and VAT, leading to tax evasion and loss of state revenue. The FTS actively monitors and investigates such violations as part of their enforcement mandate to detect and prevent customs fraud and protect the Russian budget.
The potential risk to citizens' health due to document forgery has also been emphasized by the FTS head, Valeriy Pikalov. Dishonest practices may lead to the importation of unsafe products, such as children's goods, auto parts, and household appliances.
The estimated financial impact of these measures over five years could reach 300 billion rubles. In response, the Russian government is working on a combination of control measures to tackle dishonest practices in foreign economic activity.
Despite the challenges, it's important to note that many instances of understating the value of imported goods have been reported. Honest businesses cannot compete with dishonest market participants due to these schemes. However, the FTS remains vigilant in their efforts to combat these practices and protect the integrity of Russia's foreign economic activity.
- The unchecked dishonest practices, such as under-invoicing and falsifying documents, can create a disadvantageous business environment for the industry and finance sectors, as they lead to reduced customs and tax payments.
- The Russian government is addressing the financial losses due to dishonest practices in foreign economic activity by implementing control measures, as these schemes have the potential to impact general-news and crime-and-justice sectors, including public health, through the importation of unsafe products.
- If not addressed promptly and effectively, the growing prevalence of dishonest practices like understatement of the value of imported goods and round-tripping could lead to significant financial losses for the Russian budget and create an unfavourable industry and finance landscape.
