THE GAS CONTRABAND A greater scandal than the one concerning cigarette smuggling

In an interview granted to BURSA discussing tax evasion, former Finance minister Sebastian Vlădescu said that cigarette smuggling is small potatoes compared to gas smuggling.

Sebastian Vlădescu says that the action of the authorities against cigarette smuggling through the customs is a step forward in the fight against tax evasion in general. The former minister of Finance said: "Cigarette contraband is petty for the most part. If an investigation was initiated and it was done thoroughly, it will not stop, in case there was indeed a pyramid system which collected the money. But in my opinion, as to what concerns cigarette contraband, I don"t think it went beyond several zonal collections of payments. Things were set up on a local level, with several institutions operating in collusion, such as the customs and the police".

Tax evasion is a complex phenomenon, with grounds which are specific to each field in which it is present, the former finance minister suggests, comparing cigarette contraband with gas smuggling and with tax evasion in the food and agricultural sector.

Sebastian Vlădescu considers that there is a major difference between cigarette contraband and that involving gas: "These are different worlds, and different fiscal deposits. When it comes to Oil Terminal, we are discussing trains, oil cars, pipelines. On the border with Ukraine for instance, we are talking about ships that perform operations with diesel oil which is carried out of Ukraine without paying duties, unloaded in the next port and introduced in Romania".

Contraband with oil products is one which is done on a large scale, whereas cigarette contraband is mostly small potatoes, says Vlădescu: "The market for oil products is where the battle is, this is where we need to see how far the distribution channels go".

Vlădescu says that the focal point for the contraband with oil products is Oil Terminal Constanţa and that they are shipped mostly to the Sibiu, Tg. Mureş and Cluj areas, where the number of independent gas stations is greater than in the East or South of Romania.

But, while evasion in the tobacco and gas makes its profits by unfairly competing with manufacturers and retailers that abide by the law and which see their business shrink in line with the size of the "black market", in the food and agricultural sector, tax evasion is directly caused by the poverty of the population.

Sebastian Vlădescu said: "Tax evasion in the case of food products - vegetables, fruit, meat, meat products, milk - is very closely connected to poverty. The end buyer will always buy the cheaper, lower quality product. The poorer people are, the harder it is to fight tax evasion. Our VAT receipts are very low compared to other countries - a large part of the VAT comes from consumer goods. In Romania for instance, in the market for meat, perhaps more than half of the meat that is sold goes through tens of thousands of shops that should be shut down".

Sebastian Vlădescu says that Romania needs to have a law for retail trade, which would set up the standard for stores, and those that don"t comply would be closed.

This is feasible in major cities such as Bucureşti and Cluj, but not in small cities like Slobozia or Mizil, minister Vlădescu says: "The problem is, that if we did that, it would automatically cause prices to rise for the poorest people in the areas in question, by at least the 24% of the VAT".

The former finance minister says: "It is a world that can not be eliminated, not without eliminating poverty and constantly raising the average wage. Which is a thing that, for the several millions of Romanians, about two to four of them, that are living near the poverty threshold, will be very difficult. When it comes to meat or bread, it"s hard to fight tax evasion. On the market for bread, about 60-70% don"t pay VAT. But if we were to raise wages by 24%, for about 40% of those 60% that don"t pay VAT, that would mean an increase in the cost of living by 12%, (because for them bread accounts for perhaps half of the daily basket), and that"s if we introduced VAT for bread alone".

In case the former minister of Finance is correct in his estimates for the cigarette and gas contraband, we can imagine the shakeup in the Romanian society, if after this huge scandal of the customs, we would also have an investigation on gas trafficking.