Main points
- In the Poltava region, a suspected tax evasion scheme by the supermarket chain “Marketopt” through “splitting the business” into more than 3,500 individual entrepreneurs has been exposed.
- The scheme allowed avoiding the tax burden by registering individual entrepreneurs under front persons and making part of the payments “in envelopes”.
BEB exposed a giant “business fragmentation” scheme / Collage of Channel 24, photo BEB, illustrative photo sobitie.com.ua
A high-profile story is being circulated in Poltava Oblast surrounding one of the largest local retail chains. People's Deputy Hetmantsev said that this is how the supermarket chain “Marketopt” evaded taxes using various schemes.
What is known about the large-scale “business fragmentation” of sole proprietorships?
The scale is impressive: hundreds of stores, thousands of “entrepreneurs” and, according to the investigation, a well-established scheme to minimize taxes, the BEB reported.
This is a large regional chain of grocery stores , which: has over 400 retail outlets and operates in 7 regions of Ukraine:
- Poltava region
- Kyiv region
- Sumy region
- Dnipropetrovsk region
- Chernihiv region
- Cherkasy region
- Kirovohrad region
In fact, it is one of the largest local networks in the region.
People's Deputy Danylo Hetmantsev reacted to BEB's report about the exposure and named the network:
The legendary “Marketopt” has started having real problems. We'll see how things develop, but the sign is definitely positive,
– says Hetmantsev.
Online searches / Photo BEB
According to the investigation, the company did not operate as a single legal entity. Instead, the business was “fragmented” into over 3,500 individual entrepreneurs.
- The company probably had separate people who actually serviced this system: they registered individual entrepreneurs, registered them as front persons, kept parallel “black” accounting, and controlled financial flows within the network.
- The money could be transferred not entirely officially – some payments were made “in envelopes”, which made it possible to avoid the full tax burden.
- Particular attention was paid to ensuring that each individual entrepreneur formally remained within the permitted income limits.
As a result, the illusion of thousands of individual small businesses was created, although in reality they all operated as part of a single large retail chain.
Online searches / Photo BEB
Online searches / Photo BEB
How does the “business fragmentation” scheme work?
Business fragmentation schemes allow entrepreneurs not to show the entire turnover. Economist Oleg Getman and tax consultant Mykhailo Smokovich told this in comments to Channel 24 .
Large business fragmentation schemes are particularly common in retail and food service. They become noticeable when a supermarket or restaurant issues multiple payment receipts.
Oleg Getman
Economist, coordinator of expert groups of the Economic Expert Platform
All these splitting schemes in restaurant and retail chains are built on the fact that they are not just split into individual entrepreneurs, but also individual entrepreneurs do not issue the vast majority of fiscal checks. That is, they do not show their turnover and thanks to this they can continue to exist as individual entrepreneurs. If you force them to show all their turnover, then the splitting scheme becomes almost uninteresting. Because the limits will end in a month or a few weeks. Too many of them will have to be changed, so it will be more profitable to switch to a common system.
To combat the business fragmentation scheme, the Ukrainian tax service needs a reboot. To do this, they need to pass bill No. 9243, but its consideration is being postponed. Tax consultant Mykhailo Smokovich also believes that the tax service currently does not have enough resources to expose the schemes , so it should be given more opportunities.
Mykhailo Smokovich
Accountant, tax consultant
The tax office should detect such cases, but its tools are limited. If detected, it can interpret this as a fragmentation of the business and try to collect all these individual entrepreneurs together in the acts. And all the turnover that went through this store should be taxed not under the simplified system, as the company did, but under the general system. But here it is very difficult for the tax office to collect everything together, detect and hold the company itself accountable.
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Other illegal businesses exposed by BEB
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In the Odessa region, a scheme for the illegal sale of alcohol and cigarettes, which was carried out by an entrepreneur from the Bilhorod-Dnistrovskyi district, was exposed. During the searches, more than 5 thousand packs of cigarettes and more than 70 liters of alcohol worth over 1.6 million hryvnias were seized.
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The Bureau of Economic Security conducted over 70 searches, seizing products and equipment worth 30 million hryvnias related to the shadow vaping business. Participants in the scheme avoided paying taxes by splitting the business into various individual entrepreneurs and companies, and laundered money through financial transactions.
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In the Odessa region, a flower shop owner used a “business fragmentation” scheme, dividing it into dozens of individual entrepreneurs to evade taxes. During the searches, documents, cash, seals, and flowers totaling over 10.5 million hryvnias were seized, and the entrepreneur was declared suspicious.