Oleksandr Klymenko: “Do I know about “family”? Yes, I have watched “The Godfather” movie”
Ex-minister of Revenue and Duties Oleksandr Klymenko has become very famous in recent weeks. Mass media actively circulate video records where he, together with ex-Prosecutor General Viktor Pshonka, breaks through out of Donetsk airport; other pieces of the video record demonstrate an iron-clad room inside the Ministry building, an office chair worth 70 thousand Euros, and a fighting ring in the same building.
And last week, the European Commission has put the name of the ex-Minister, along with several other former officials, on the list of persons, banned from entering the EU and whose accounts are being frozen. So, we have decided to talk about all this with Oleksandr Klymenko in person.
Let’s start with the facts that have excited people the most – an iron room in your Ministry, boxing ring, salt sauna, office chair worth 70 thousand Euros and more. What did you need all this for?
For those who lift this wave today, it is convenient to speak about the bad, forgetting about the good. Therefore there are conversations about the aforementioned iron rooms, rings…
– First: everything that was built, was built solely by my personal funding, not a single penny from the budget was spent. Prior to joining the State service I was doing business, and I’m not a poor man. Second: all the things you’ve mentioned stayed in the Ministry. If someone wanted to hide something, then nothing would have been found in the Ministry after I had left. Third point: it is necessary to diversify what is truth and what is not. For example, office chair, about which all wrote that it cost 70 thousand Euro. In reality it cost dozen times less – not more than 5 thousand – and I had bought it in 2004. And all this is being delivered to pubc as a mega-news. For some reason nobody speaks about problems which exist in the Ministry and in economy as a whole. But it is inconvenient to talk about them, it is easier to invent some fairy tale about mean and evil Klymenko, who arranged totalizers. Why then nobody says that today operate over 500 taxpayers service centers, that are standardized, with a uniform approach, and that payers have forgotten what was standing in lines, walking around floors and offices. It was a regular thing when I came to tax authority. We were planning to implement the same project on customs points as well, already in this year of 2014. All these projects are now at disposal of the new management of the Ministry, so to speak, they’ve inherited them. For those who lift this wave today, it is convenient to speak about the bad, forgetting about the good. Therefore there are conversations about the aforementioned iron rooms, rings… Speaking about the iron rooms. What wonder? When diplomatic level negotiations are being tapped/listened/bugged, in this case any sane person would think about privacy. That is why there was a need in this room.
And give an example of any conversation or a topic of conversation which took place in this room and demanded such degree of confidentiality?
– This, first of all, was processing of the operational information, received from trusted sources, planning of especially important actions of checks/audits of large and influential tax dodgers.
Point taken. And why did you need ring?
– I have always been fond of sports. My team and I have worked to twelve, to two o’clock in the morning. Therefore it was necessary to keep a good physical shape on spot, as it reflected on quality of work. And again, this room (boxing ring room) was not in my private office, as it is stated by the media today; it was located in the Ministry building, where it could have been used by other employees too.
That is, you used it for yourself, and not for ultimate fighting?
– Of course. As for ultimate fighting and other nonsense, which is now being told about me, I have a very rigid intention to protect my reputation. And concerning all allegations that were made against me – ring and totalizer, conversion centers, salt mines, – I’m going to file a lawsuit on protection of honor and dignity against those, who give voice to this information. Nobody cancelled a presumption of innocence. Inventing, coming to national Mass media and distributing false information – these are not standards of the European society. Therefore, anytime soon, with the purposes of protection and refutation from similar nonsense, a legal mechanism will be involved in a jurisdiction, where I will be able to protect my interests.
It means that claims will be filed to foreign courts and not to Ukrainian courts?
In Great Britain?
Artificial social request for criminal prosecution against me is being created. But the authorities do not have real grounds for this – I am ready to be responsible for every action and every signature I’ve put as Minister.
– I wouldn’t like to talk about it yet, but soon you will find out. The question is as follows: today, a lot of unjustified accusations sound in my address. With what purpose it is done – is absolutely not clear to me. Artificial social request for criminal prosecution against me is being created. But the authorities do not have real grounds for this – I am ready to be responsible for every action and every signature I’ve put as Minister. Therefore, perhaps they will find some petty cases, which they will try to hang on me. What for? In order to distract, thus, public attention from real problems in the work of the Ministry of Revenue and Duties, and economy as a whole.
We will talk more about these problems, but let’s get back to other sort of accusations. You are being accused of the fact, that with your help, through the work of conversion centers, the State is caused damage amounting to 77 billion hryvnias. That this money had, allegedly, been withdrawn in the interest of the so called Yanukovich Family. Mass Media write some kind of Program (exactly so, with capital letter they write) on encashment, by means of which businessmen avoided taxation, allegedly with the help of the Family for a certain interest/percent.
– Let’s move away from cliches and talk to the point. Is there such a phenomenon in Ukraine as money encashment?
Yes, there is.
– Yes, there is. As well as prostitution and drug trade. And the same problem exists in almost every country of the World. More precisely, let’s leave aside slang word “encashment”, let’s call it “tax evasion” or “optimization of taxation”. This phenomenon exists everywhere, to some extent.
Just a second! Taxes are being evaded in all countries, but not in all countries this is a systematic phenomenon, under the control of government officials. That is, actually, the question. They say that all these companies, that counted almost 200, were engaged in encashment on a centralized basis.
– I will answer. It is easy to judge about the role of officials in different schemes on figures. It is logical, after all, to assume that the more role of officials in this process is, the bigger is the scale of tax evasion. Let’s request and take a look at the data, how much it had been collected into the state budget in 2010, then in 2011, 2012 and 2013? You will see absolutely impressive dynamics, and you will see that state and local budgets revenues grew, outrunning economic macro-indicators of the country. This is number one. Now, about the programs you’ve mentioned.
So, what is this Program? Have you heard about it? They say, that even now businessmen receive letters – like, we continue working according to the same Program.
We created the whole system which reacted to so-called worthless transactions, revealed suspicious operations in on-line mode. It hit both encashment-offices and fictitious VAT.
– Program – is a label, specially invented, obviously, to impress the public. But as judged by what they write about it, this refers to encashment platforms. This encashment system , or, if you wish, Program, existed before me. But after I came to tax authority and took measures, the situation started rapidly improving. We created the whole system which reacted to so-called worthless transactions, revealed suspicious operations in on-line mode. It hit both encashment-offices and fictitious VAT. At my time, VAT grew from 3 billion of positive balance to 7 billion and due to this VAT increase here, we basically solved the problem of refund of this tax to business. A system of automatic refund was. And if in past years any meetings with foreign Ambassadors started with a question when their respective companies will be refunded VAT, during the last year this question didn’t sound any more. That is, speaking language of figures, it was exactly the time of work of our team, when a severe blow was delivered on encashment and everything that was connected with it. It was a systematic work. Once a month, and then every week we sampled enterprises according to certain criteria, analyzed them. There are criteria of an enterprise which works honestly. The white salary is paid there, taxes are completely paid, and then we have no claims against such companies, we can only thank them for their work. At the same time, there are “transit enterprises” – flows of money simply stream through them. There are enterprises – tax pits. And for each problematic category of enterprises, there was an accurately planned schedule, a road map: What division, Has to do what, During what time. What was the result? The number of encashment platforms and, respectively, their turnover drastically reduced. Growth of budgetary revenues is confirmation of that fact. And if now somebody receives letters about some kind of program, then why wouldn’t tax police initiate investigation – who sends letters, to whom, find these people, interrogate them. Is it so difficult to identify – who and from what addresses does the mailout? Why isn’t it done?
And so who covered remaining encashment platforms?
We started fight. We have put behind the bars many of them. And I am sure that another year of our work, and encashment would have been reduced to the minimum limits. But at the end of February a Power Shift occurred.
– It was a whole system of people, who built their business on encashment not for a year or two, or not even five years, and long chains were involved. Corrupted officials, bank officers, law enforcement officials … We started fight against them. We have put behind the bars many of them. And I am sure that another year of our work, and encashment would have been reduced to the minimum limits. But at the end of February a Power Shift occurred. And interesting things started happening: VAT collection dropped, as well as collection of taxes on the whole, but conversion centers began to multiply like mushrooms after the rain. According to Ukrainian media – they are already offering their services via the Internet. And if at Klymenko times budget income grew, refunds were granted on time, and after Klymenko has left, tax collecting dropped, refund turns out to be under a big-big question mark, encashment platforms will soon open in each yard, tell me – who is in charge of “encashments”? Who creates greenhouse conditions for economy shadowing and encashment?
But the leadership of MinRD reported that in March tax revenues increased in comparison with March of last year. And during two weeks of April growth made 20%.
– It is a bluff. It is incorrect to compare March-2013 and March-2014. It was for the first time in 2014, that enterprises paid profit tax for 2013 in March. In March, 2013 it wasn’t so. And even with such indisputable advantage, this year’s profit tax declaration campaign was carried out in such a way, that it has laid down problems for the whole year. After all, the profit tax is paid monthly as 1/12 from annual profit. As one of examples, in late March MinRD, for some unknown reasons, allowed adjustment of tax liabilities of enterprises for previous periods – 2011 and 2012 downwards. As a result, the budget lost 800 million UAH in a week, not to mention completeness of declaring of taxes for the current period. On customs payments the drop is even more grandiose.
But, by the way, you also have also been accused of creating a system of understatement of customs payments.
– Yes, I know, there are some far-fetched claims, that I allegedly created a scheme for understatement, and in some cases, non-payment of customs duties. Absolute nonsense. First of all, due to our work, during 2013 the amount of decisions on adjustment of customs value of goods has decreased by more than 50 thousand! And this is only one year! For example, in 2012 when the Customs was an independent agency, there were made as many as 84 thousand decisions on adjustment of customs value! Secondly, we have always seen an endemic problem in the issue of understatement of customs payments, and therefore, proposed to actively move the process of determining of customs value at the stage of post-audit, which at that time did not actually work, although it was provided for in the Customs Code. We have discussed this issue with the businesses at the last meeting of the Investment Council in February, obtained their support, developed a clear introduction concept. Would I make this step if I was interested in existence of an opaque system of determining of the customs value? Overall, we have had a clear objective – to defeat any corruption, and in this case the shortfall of payment – is a corruption. I’ve always said that an employee of the customs post decides more than Minister. Because in order for the Minister to give any command, it has to be retransmitted five times more until it reaches a place, and the employee at a customs post may perform any act, say, let the car pass without paying tax and that’s all, no one will notice. That is why we had an emphasis on the maximum automation of processes at customs, on remote control. Now this work is being curtailed, and payments drop.
They refer to the fact that due to devaluation, imports has drastically reduced.
– Not only due to this. I will make two examples. We have introduced GPS-locks in order to avoid the so-called ragged transit. What was the problem? A vehicle with a cargo of clothing, for example, comes in and, supposedly, goes to Russia. On the way, clothing is unloaded and, of course, no fees are paid. How do we control such case? Should we send a tax police officer to control it? It is impossible; we don’t have that many people. We have come to a conclusion that it was necessary to automate everything, so we have introduced GPS-locks as a seal and with their help saw the car leaving, what was its speed, the logic of its route and, respectively, if there was a stop somewhere, illogical route, the computer gave us a beacon, we responded, deployed on spot and performed inspection. Today, these locks are not used or are used by 2%. The same story is with customs scanners. They allow looking what is transported in containers, without resorting to random manual inspection. When the Customs joined as a part of the Ministry, there were only two scanners in operating condition out of nine. I was heard by the former Government, money was allocated for repair of the remained seven. All 9 scanners worked in the most problematic, so to speak, port, with the highest corruption risk – in Odessa. Today, again, only two scanners out of nine are working. The others “suddenly” broke. In general, over the past month, work of the Ministry in many areas has simply failed, staff is demoralized, and working atmosphere is very heavy. I have recently talked with the senior priest of the church, which is located near the Ministry. Remember, the one that I allegedly built “for myself”? In itself, this is, certainly, a top of cynicism. Yes, I built a church for mu own money, but it was open to all – not just employees, but also ordinary parishioners. More than 100 parishioners, by the way, came on Easter for the Vigil to this church. But I am not even speaking about that now. So, I spoke to the senior priest. And he notes that the flow of parishioners has recently increased significantly. Team is demoralized and frustrated, and therefore, comes for a prayer.
According to your data, who runs the process of appointment of people in Customs, in Tax, regional Directorates of the MinRD now? What selection principles are applied?
– It is rather a question to the Prime Minister Yatsenyuk, because as far as I know, the new MinRD leadership was appointed by his decision. Many rumors are about, but I will not comment on them, because I don’t like rumors myself.
They say that Khomutynnik has influence on processes within the Ministry?
– This question needs to be addressed to Vitalii Yurievych. Yes, he has influence, because he is the Head of the relevant Parliamentary committee. And when he was a member of the Board of the Ministry of Revenue and Duties, he had influence. In the sense that I could always come to him and say: here, it is being done wrong; here it should be like this. As the Head of the Ministry, I always consulted with him, told him what specific initiatives were important to me, suggested to work together. I’m not ready to comment on what is happening now.
As for the April figures? After all, they talk about 20% increase in tax payments?
– Another bluff. First of all, it is possible to judge about the completeness of monthly payment only based on monthly results, there is no sense in giving any statistics in the middle of the month and drawing general conclusions from it, the dynamics can still sharply change. Secondly, yes, indeed, during 11 banking days in April, almost 4 billion UAH of tax payments were received, which is 24% of the plan. But a significant share of these taxes and fees is made by advance payments. During 11 days of April it has already been taken 1,4 billion UAH of advance payments or 35%. And also current payments, which will be declared by business entities in this or subsequent months. I hope that within the remaining 10 banking days budget figures will be made not only by current payments of enterprises, but also due to work with the shadow sector of economy and other sources of filling the budget. For example, due to repayment of a tax debt, that doesn’t move from a point of 22 billion UAH.
In other words, the declared increase in budget revenue is now mainly due to overpayments?
The State has picked pocket of every citizen. Hryvnia is falling, and at the cost of this they are trying to execute the budget. To simply fill it with depreciated Hryvnia.
– Not only. There is another reason – devaluation of Hryvnia. Does the gasoline price grow? Yes, it does. It means that the excise tax grows. And the same situation on several more points. In general, what is devaluation from an ordinary person viewpoint? It is a robbery. The State has picked pocket of every citizen. Hryvnia is falling, and at the cost of this they are trying to execute the budget. To simply fill it with depreciated Hryvnia. This is very convenient – let’s raise dollar exchange rate to 20 UAH – and all plans will be over-fulfilled. And the fact, that it brings people to the border of poverty because of prices growth – nobody speaks about that. After all, social benefits are thus either frozen or reduced. And more. Look – during the last four years Hryvnia was stable, and interest rates on deposits were high. People could gain good, legal income. And now all this burns down right before one’s eyes because of devaluation.
And another question regarding the budget. You criticized the new Government for having delayed introduction of Transfer pricing Law, which was supposed to close off the many schemes of taxation avoiding by large businesses. Why, in your opinion, it has not been introduced?
– Here the story is crystal clear. When the law was being adopted last year, there was a very serious pressure upon us from the part of lobbyist structures, connected. We conducted dialogue with them, took into account some remarks, but the Law was still adopted in a rather tough version. What happened now? The State, after well known events, is weakened and can no longer withstand the pressure of groups of influence who think first and foremost about their own interests and do not think about the budget revenues even in such a critical situation as it is now. Here is the result. I will mention only one figure – one of the largest FIGs, which sells and resells energy sources, under the new Law would have had to pay 1 billion 79 million to the budget. And now let’s ask for whom this Law is disadvantageous.
Now, getting back to the former Government. You are surely familiar with such notion, as the “Family”…
– I have watched “The Godfather” movie.
No, I’m not speaking about that. I mean what Ukrainian Mass Media call Family – political and economic group around Yanukovych’s son Aleksandr. You are being named as one of the key persons in this group. What can you say in this regard? Did you have any contact with Yanukovych’s son, common business together with him or any other interests?
– I believe that “family” is a cliché that has been imposed on society today. I had no business, and no common interests with, as you say, “family”. Yes, I knew Aleksandr Viktorovich from Donetsk. But in Kiev our contact was virtually reduced to zero – there were, maybe, a couple of meetings. But I have never had any close relationship with Aleksandr Viktorovich. And now, I certainly don’t.
And with Sergei Arbuzov?
– I know him very well since Donetsk. We have worked together in the Government; our views on economic issues coincide in many aspects.
But did you feel any impact of Yanukovych’s son during your activity? It was rumored that he had created a grandiose business empire.
– As far as I know, rumors about the scale of business of Aleksandr Yanukovych are a little bit exaggerated.
And, nevertheless, there’s no smoke without fire. If everybody speaks about Yanukovych’s Family, about his son, then some similar phenomenon happened in deed and not in name?
– I believe that stories about this are fabulously exaggerated. I am not ready to speak on behalf of all, but I’m ready to speak for myself. Who made the decision to appoint me as the head of the State Tax Service in a fairly young age?
– President. Not son. President. Who made the decision to establish the Ministry of Revenue and Duties? Who appointed me as the Minister? President, again. And he was the one, who set my objectives. Therefore I wouldn’t exaggerate influence of the son on processes.
But in personnel matters, they say, his influence was significant.
– Again, I did not feel it neither on myself nor on my Ministry. My policy is such that I always build a unified command and control system – and I am ready to be responsible for the result of work of the whole team. Maybe, that’s why I communicated with Aleksandr Viktorovich infrequently.
And what are your current relationships with Viktor Yanukovych? Do you still feel yourself a man of his team?
— I will say this: I am a manager who has performed the contract. That is very important to understand. I performed tasks, assigned to me, as the Minister, by the President. Yes, the President was building a vertical power structure, and I have worked in this power vertical, clearly fulfilling task, assigned to me. For example, I was tasked to provide financing of social programs, without breaking balance between business and the State, and we coped with it completely. We had to show an upward trend of changes in budget revenue. And we showed it. I was hired as manager to solve these problems. I have fulfilled them. Full stop.
So, you don’t communicate with Yanukovych after he left Ukraine?
– No, I don’t.
There is another the person with whom you are associated. It is Sergey Kurchenko, whom you, supposedly, helped in doing business. Just recently, a conversation of two voices, similar with voices of Kurchenko and Kolomoyskii, was posted in the Internet. And out of this conversation, one may conclude that Kurchenko has some sort of contact with you …
– Do I know Sergey Vitalyevich Kurchenko? Of course I do. I know all business elite of Ukraine. I consider Sergey Vitalyevich is rather successful businessman and he has strong traits of character. For some people it has taken 10, 20 years to go the same way, as he did in 5 years. But for many people much it is easier to say that someone helped Kurchenko, than to admit that he is more talented. As for Kurchenko’s business empire, I never helped anybody in building business empires.
Including Sergey Kurchenko?
– Including Sergey Kurchenko. Another thing is that today he has become the hostage of a situation when an image of the enemy is created in his person. But I believe that the time will set the record straight. I think in a year or two it will be clearly seen who was right and who was wrong. Let us remember that after the first Maidan in 2005(Orange revolution), many major businessmen, at a time, have become “public enemies”, and just in a year, when everything calmed down, they were again respected entrepreneurs, philanthropists and patriots of Ukraine.
Let’s get a little back in time. Certain changes have taken place in the country. Maidan won, Yanukovych lost his power. Was it predetermined, or it would be possible to avoid all this if the former Government acted in a different way?
– History does not tolerate the subjunctive mood. What has happened – happened. Did it go good for Ukraine? Time will tell. I respect position of people, who came to Maidan and demonstrated the power of will, their aspiration to changes and to the best. But what do we have today: economic collapse, events in the Southeast. But things could have been different. On December 17 Ukraine managed to arrange with Russia about a large credit, about lowering gas prices.
If those arrangements were in effect now, it would not be necessary neither to boost utility rates nor to cut and freeze social benefits (on the contrary, we were planning to raise them). And the Hryvnia exchange rate would have been stable, and the economy would have received the strongest impulse for development. And certainly, the country would not have been falling apart. Now all these arrangements are broken.
And what do you think about Crimea?
When Maidan occurred, not a single Ministry building had been seized. It’s just because we always walked out to people and talked to them.
– When today I am being asked about how I can comment on a situation in the Crimea, I answer – the Government is guilty. Today it is the easiest way – to point on someone big with a finger and to say, that’s his fault. It is an irresponsible position, which leads to nothing but an attempt to shun the responsibility. I think it is necessary to find an agreement with partners, to consider their interests and, thus, to defend interests of the country. And what is being done now in the Southeast, when instead of hearing people, the army is being sent against them? Steps which are taken today by the Government, tomorrow will become steps which will be investigated by international experts. And the limitation period does not exist for such crimes. When Maidan occurred, not a single Ministry building had been seized. It’s just because we always walked out to people and talked to them. I, myself, walked out, when the Ministry building was blocked and they heard me, and all the Heads of regional Directorates of MinRD walked out to people and we did not lose a single building. Later the process started, after the 20th of February, but before this nothing similar happened. Today dialogue is replaced by an attempt to show force, mythical force, but force. And there is a need in negotiations, there is a need to talk about the new Constitution, about extending rights of regions.
One of the indignation causes that led to Maidan, was a practice of so-called “squeezing” of business – that is, when officials come to a businessman and say – either share, or we’ll strangle you with checks and inspections, including tax audits. As one of examples – a case with Petr Poroshenko, whose enterprises were actively checked and audited by your Ministry last fall. Allegedly, this has become one of the main reasons why Poroshenko supported Maidan so unambiguously.
– You mean I helped Maidan?
Well, in a certain sense.
– That’s good (laughs). But seriously, yes, audits were initiated on Petro Poroshenko’s enterprises. All of them were carried out exclusively within the legislative field. There was no tax pressure there. Because if there was tax pressure, everything would have been absolutely in a different way. By the way, some of our claims have been rejected on the level of appeals. There were such cases. Roshen Corporation appealed to the courts. Part of their requirements, the smaller part, however, was satisfied. It’s perfectly normal situation. We met with Petro Alekseyevich, more than once we talked about this situation. Everything was resolved exclusively within the legal field. He always had the opportunity to substantiate his rightness in court, if he believed our actions to be groundless.
And what was the cause of the incident at the airport with Pshonka? You have already told much about it on your page in social networks. But who gave the command to detain you? Or was it associated with Pshonka?
At the airport, I asked to give me my documents in order to go out into the city. I emphasize again, I was not going to the aircraft.
– I’m not ready to comment on the fact, with whom this situation was associated. But let’s take a look on how things were. At the airport, I asked to give me my documents in order to go out into the city. I emphasize again, I was not going to the aircraft.
Just as I asked to do that, unknown people, without introducing themselves, blocked the way towards exit. I was not under investigation, I have not been detained. Accordingly, no one could deprive me of my liberty of movement a priori. Next, when I went to the exit, these unknown persons used physical force, and then they attempted to fire. Naturally, any person would want to leave the place of such incident. Whether it was an order about me or Pshonka – is a question to those, who performed this lawlessness.
EU sanctions are placed on you. How you can comment on them?
– First of all – I have no accounts neither in EU nor in other foreign jurisdictions. I keep all the money exclusively in Ukrainian banks. Point two. I believe that a lot of accusations that sound today to my address are pointless and groundless. And one of the European values - is the presumption of innocence. I think it is unethical to impose sanctions against people, charges against whom have not been confirmed by any court yet. Therefore, I intend to defend my position in the European legal environment on order to have those sanctions lifted.
And where do you live now, if it is not a secret? They say that in Moscow?
– When the incident at the airport occurred, I was officially on vacation and I was not going to leave the country. I was going to make that visit, which I had planned, and return. But after the lawlessness that was arranged at the airport, I realized that I and my family are in danger. And I was forced to leave Ukraine in order to be able to protect myself, to protect my loved ones.
So you are outside Ukraine?
– Yes, but for the safety reasons I wouldn’t like to name the place of my stay.
Link to source: Vesti