Ukraine’s authorities confront electronics retailers over smuggled iPhones in contraband crackdown
Ukraine’s economic crimes bureau’s new leadership brought together businesses on Oct. 8 with a clear message: the era of illicit electronics sales is over.
The newly appointed head of the bureau, Oleksandr Tsyvisnky, is hoping he can curb this illegal trade, and with that, recover an estimated Hr 20 billion ($484 million) in lost revenue to the state budget caused by illegal electronics sales.
Nearly 80% of iPhones sold in Ukraine are illegally imported into the country and sold not just at street kiosks, but in major chains, Ukraine’s Business Ombudsman, Roman Waschuk, told the Kyiv Independent.
Tsyvinsky told the companies invited to the roundtable — some of which are known by the bureau to be tax-dodging enterprises — to put an end to their schemes that help them import and sell goods without paying taxes before his agency would start opening investigations.
"The (meeting’s) approach was a non-punitive one that says that the bureau understands that there are problems in the market, but gives businesses an opportunity to fix some of their own problems first," Waschuk told the Kyiv Independent, following the meeting.
"There was a degree of understanding that things have shifted, but that the bureau would not be raiding everyone as of tomorrow morning."
Attendees, which also included the tax authorities and State Financial Monitoring Service, agreed that businesses should stop paying employees under the table and should hire workers formally rather than as low-tax private entrepreneurs, the Economic Security Bureau’s press service told the Kyiv Independent after the meeting.
Paying and hiring workers unofficially is a widespread practice in Ukraine that is unlikely to change quickly without major reforms and economic growth.
The bureau will form a working group under the Business Ombudsman Council, which will iron out new laws and rules down the line. With the different bodies working together for the first time, it will be much easier to spot tax dodging, said Waschuk.
The tax authorities busted one such scheme in March that saw two major stores avoid paying Hr 286 million ($6.9 million) in value-added tax on imported Apple products. While the authorities did not name the companies, investigative journalist Yevhen Plinsky identified the culprits as major electronics retailers Yabko and Yabluka — both variations of the Ukrainian word for "apple" — which together have 160 stores across the country.
The results of the meeting won’t be immediate, but they will be "tough and systematic," Tsyvinsky told the Kyiv Independent. Part of the responsibility also falls on the customs and tax services, with which the bureau will cooperate, he added.
Electronic goods like phones and computers are brought from Asia and make their way to Ukraine via its neighbors, bypassing the Ukrainian customs control, which has a long history of corruption. After a few greased palms on the border or forged customs documents, they end up in the hands of large companies.
Not only do these fraudulent rackets allow illicit traders to sell products cheaper than their legitimate competitors, but they also allow them to get to the market faster.
This has infuriated law-abiding businesses, which recently complained about the flood of newly-released iPhone 17s sold on shelves weeks before the official market launch on Sept. 26, said Waschuk.
Legitimate businesses have become increasingly outspoken about the shadow trade, including leading electronics market player Comfy. The CEO, Ihor Khizhnyak, blasted companies like Yabko and Yabluka for not providing receipts after he brought iPhones from their stores in September last year.
"These gadgets were not brought to Ukraine by Apple Ukraine LLC, but by someone else, illegally, literally in their underwear," he wrote on Facebook.
