Attribute and take out: why do farmworkers need one-day firms

Yelena Ivanova, Natalia Seibil

This year's harvest will be the second in the history of Russian agriculture. Despite the spring and summer droughts, especially in the South of Russia, the agricultural sector will be the only one in the entire Russian economy that will close the calendar year in positive territory. According to various estimates, from 130 to 133 million tons of grain will be produced, of which wheat accounts for up to 83-84 million tons. Grain exports have also grown this year. The cherished 50 million tons, which were spoken of at the Grain Congress in 2010 as a distant dream, in this agricultural year, farmers can achieve: according to IKAR estimates, the export volume can reach 49.7 million tons. ProZerno predicts 50.1 million tons. “The year was difficult, but not bad”, - they say in the industry.

Revert to old ways

Until 2017, the annual budget losses from gray grain and sunflower oil export schemes amounted to 65 billion rubles. The domestic market suffered even more, the budget there was losing up to 100 billion rubles. Under pressure from the Federal Tax Service, the largest grain exporters signed a charter in the field of agricultural products turnover, in which they find themselves from non-transparent contracts and announce the transition to a direct supply system. It seemed that the problem with illegal VAT refunds was finally and irrevocably solved.

However, this year there was information (video is here) that an investigation was launched against one of the major players in the Volgograd region. OOO TD Zerno Zavolzhya operates in arid regions of the region. Despite this, the holding companies show a large income every year, however, the profit is always minimal. The holding is headed by Rashid Karsakov.

In 2012-2016, Karsakov's companies used, like many large players in the Volgograd Region market, the services of one-day firms to obtain a VAT refund. Karsakov had about 80 of them. The scheme was simple: agricultural producers sold grain to such firms for cash, sometimes with forged documents without VAT. Then this grain is resold for another one-day, but already with VAT, it is immediately resold to a third intermediary company, after which the grain was exported through elevators controlled by the holding. Such firms existed for no more than six months, then they were liquidated with debts to the state, and new ones were opened in their place. In 2015, the tax service put into operation an automated control system. The state was able to track the payment of VAT along the entire chain from the manufacturer to the end consumer. The cunning businessman had to change more often one-day firms, the life of which was reduced to a couple of months. After the signing of the Charter and in Zerna Zavolzhya, the series of bankruptcies of the holding's counterparties stopped, but manipulations with taxes, as it became known, continued. It turned out that some of the companies associated with Karsakov ended up far from Volgograd - in Lipetsk. As the employee of "Zerno Zavolzhya" reported in an interview on YouTube, it's not by chance:

"This is a relatively new scheme of tax evasion and withdrawal of money, when a company purchases in one region, elevators are in another, and registration with the tax office in a third. This allows just to carry out fraud and thanks to this gap in control over this business from the tax authorities, and air is brought there according to fictitious documents, this is the volume of yields that are overestimated, but, in fact, grain and other crops are bought for cash on the side. And these products are then exported and the money is cashed there".

The Grain Union of Russia confirmed to Novy Izvestia that an investigation is being carried out against OOO TD "Zerno Zavolzhya" (LLC TH). We sent questions to the Federal Tax Service of the Volgograd Region and the Ministry of Agriculture. We were informed from the Federal Tax Service that the company OOO TD "Zerno Zavolzhya" (LLC TH) is not registered, since, according to the USRLE (Uniform State Register of Legal Entities), it is not registered in the Volgograd region. An interesting detail: the response to the request came in record time, but there is no signature on it. As the lawyers told Novye Izvestia, according to the existing law, any document must be certified either by electronic or handwritten signature. Apparently, someone was in a hurry to answer our questions... The site of OOO TD "Zerno Zavolzhya" (LLC TH) and an Instagram account still give the actual address of the organization in the Volgograd region.

Interestingly, Rashid Karsakov himself received Maltese citizenship some time ago. This practice of selling European passports causes an extremely negative reaction in the European Union. For a lot of money, one could buy a passport not only in Malta, but also in Cyprus, but there this dubious practice was discontinued this year.

To confirm his solvency, Karsakov used two peasant farms - KFK Semenenko and Dailidenko, which unexpectedly showed half a billion rubles in profit. True, the business success of these farms was fleeting - after the Karsakovs received a Maltese passport, both farms were immediately liquidated.

Undoubtedly, after 2017, the situation with the withdrawal of the agricultural sector from the gray-black to the white zone has improved. Arkady Zlochevsky, President of the Russian Grain Union, Chairman of the Board of Directors of the Russian Grain Union, Member of the Council on Agroindustrial Complex under the Chairman of the Federation Council of the Federal Assembly of the Russian Federation, says:

"Quite a lot has changed. The number of operators in the market has decreased. They practically stopped running around with bags of cash. It can be noted that the cost has increased".

However, in the "Zerno Zavolzhya" Holding, time has stood still - grain is purchased for cash, the price is much lower than the market price. In addition to the purchased goods, even larger volumes appear in the reports. Farms in the middle of arid steppes suddenly become champions and candidates for subsidies from the state. After that, peasant farms are liquidated, and 600 million rubles are withdrawn from them. Karsakov's elevators drive grain for export, and the money from the sales remains in the offshores of the Maltese citizen.

Agriculture Minister Dmitry Patrushev reported last week on the harvested grain to President Putin. The harvest, indeed, turned out to be excellent - the second after the record-breaking 2017. The President was worried about the growing prices for agricultural products in the country. But no one canceled the requirements for the cleanliness of doing business locally. Novye Izvestia is expecting answers from the Agriculture Committee of the Volgograd Region and the Regional Tax Inspectorate of the Lipetsk Region, where the company TD "Zerno Zavolzhya" is now registered, and will inform our readers about them.

Market participants and experts recall the tumultuous stories of tax evasion and grain purchases for black cash and say that the time for such business has passed. Professor of the Institute of Economics of the Russian Academy of Sciences Ivan Starikov believes:

- The market has been largely civilized. Russia has become the largest player. Therefore, people who are caught once will drop out of the number of exporters, and the business will be closed. Therefore, if such stories do happen, then with those companies that are on the verge of bankruptcy.

VAT against unified agricultural tax

Arkady Zlochevsky is sure that the situation with manipulations in the "Grain of the Trans-Volga Region" is not of a massive nature, but there is a reason for them too:

"An investigation is underway on the Grain of the Volga Region. This is Volgograd. The history of the "Grain of the Volga Region" cannot be attributed to the entire South. Such operations are not practiced en masse. The "Grain of the Volga Region" has registration in one region, and operations in another. This allows you to hide something from the tax service. This has no mass practice. It is possible to get rid of all these attempts and departures into the gray and black zone only by abolishing the agricultural tax as a class. As long as there is an opportunity somewhere to maneuver with VAT, naturally they will look for a loophole".

A single agricultural tax accumulates and balances various factors of agricultural production. It is beneficial, first of all, for agricultural producers. On the contrary, exporters of agricultural products need VAT, says Ivan Starikov:

"Our number of exporters can be counted on one hand. The issue rests on VAT refunds, so large exporting companies want to pay this tax, as they will be refunded. If VAT is introduced without exception, then agricultural producers who are not large exporters will suffer".

The current Prime Minister Mikhail Mishustin, being the head of the Federal Tax Service, was able to introduce modern information technologies, which made it possible to suppress abuses associated with VAT refunds. The ultimatum of the tax authorities, which sounded to exporters to buy products from agricultural producers directly, continues to operate. However, Arkady Zlochevsky sees that the changes have occurred partly within the framework of the restrictions that were introduced. The Grain Union has always insisted that the unified agricultural tax should be abolished:

"This tax is inadequate. This is a benefit that can only work in a criminal environment, and nothing else".

However, the government's struggle against VAT refunds has borne fruit - the size of the black and gray markets has shrunk. The government stopped payments and the market became more transparent on the whole.

Grain and sunflower quotas

Quotas became an experiment last season. Government intervention in the regulation of markets has caused confusion and a reduction in the number of exporters. For sunflower, the export permit regime led to the fact that supplies stopped - exporters simply did not know where and how they could obtain export permits, says Vladimir Petrichenko, general director of ProZerno. As a result, 1.56 million tons were exported instead of the planned 900 thousand tons. On the eve of the introduction of the ban, exporters were buying up everything that they could contract, which led to an increase in the price of sunflower. The situation repeats itself: after the announcement of an increase in the duty from 6.5% to 30% from January next year, in October the export amounted to 194 thousand tons, and in October 2019, 4.5 times less was exported - only 44 thousand tons.

"It was an experiment last season. It worked as we predicted for a rise in prices. Although it was initially stated that quotas are a measure designed to curb price increases. But it works exactly the opposite of what is declared. Therefore, we both opposed and oppose. We continue to insist, but they don't really hear us. So we are threatened with quotas next year", - says Arkady Zlochevsky.

The introduction of grain quotas did not bring any explicit restrictions on actual exports, says Oleg Sukhanov, head of the grain department at the Institute for Agricultural Market Studies. But due to the fact that some companies realized late, the quotas led to defaults and losses on previously contracted volumes. The number of grain exporters also decreased, if in June 2019 there were 65 companies on the market, then by July only 9 of them remained. Only in October 45 companies returned to the market. As with sunflower, 4.27 million tons of grain were exported in March 2020, 400 thousand tons more than in March last year and 1.72 million tons more than in 2018. In anticipation of quotas from February to July 2021, experts expect that 60% of the wheat volume, which was expected to be exported in the 2020-2021 agricultural year, will be exported.

The introduction of quotas was explained by the fact that due to drought and related fears that the harvest in 2020 may not be so record, and also due to the fact that exports were growing, a deficit could arise in the domestic market.

"I think these are unfounded fears, for the simple reason that we are in serious overproduction, especially in a number of livestock products. This was due to the drop in real disposable income of the population - for the seventh year in a row. Trade feels it. X5 Retail Group will introduce a new format as early as next year - super discounters, which will be even lower than Pyaterochka. This all suggests that the average check is falling", - says Ivan Starikov .

Experts are confident that export restrictions lead to the fact that the produced grain will not be sold anywhere. There are no buyers for it, even if it is either processed or given to livestock feed.

The state should think from a friend, market participants say. While Russia is shipping grain to Novorossiysk, nothing depends on us further. Over the past twenty years, the consumption of wheat has been growing smoothly, but the price for it resembles a cardiogram, it either falls down or soars to the skies. 5-6 world speculators determine the price. The choice is not great - either Russia creates its own global player, experts say, or we will always depend on such price fluctuations.