Drone Smuggling, Customs Fraud Highlight Ukraine’s Corruption Woes

The guard surmised the location of the drone’s pilot by tracking its movements. As he approached the hideout, however, three men rushed out, beat him, and shot him with a rubber bullet. Police reinforcements called in arrested the three. 

Smugglers are increasingly using drones to move cigarettes from Ukraine to Europe where they can be sold tax-free at a tidy profit, according to Ukraine’s State Border Guard. The trade has been estimated at over US$2 billion annually. 

But investigations by German newspaper Suddeutsche Zeitung earlier this week show that corruption and tax evasion in Ukrainian customs goes beyond the illegal cigarette trade.

After examining waybills and customs declarations of thousands of ships coming into Ukraine’s Odesa port, the newspaper estimated that Ukraine’s treasury is losing some $4.8 billion annually to customs fraud.

That’s more than the IMF, the EU and the World Bank have loaned Ukraine this year combined, it said.

Using informants at the port, Suddeutsche Zeitung discovered details of popular schemes, in particular, relabeling containers to dodge taxes. 

In one transaction it recorded, a container of 20 tons of umbrellas was relabeled as containing brushes, mirrors and cardboard boxes.

That took the tax from $17,712 to $4,875. At least 100 other containers underwent similar transformations, it said, noting that Ukraine’s police and prosecutor’s office were in on the scheme.

Corruption in Ukraine has made headlines this year as the government has attempted to clean up its act in order to get another tranche of funding from the IMF.

 While officials hoped that tranche would arrive in May or June, conditions set by the IMF have yet to be fulfilled, and bankers and economists are sounding the alarm over the nation’s draining foreign currency reserves.