Illicit Financial Flows in Export Operations with Agricultural Products

Abstract

The purpose of this paper is deal with possible ways of illegal profit shifting abroad, in particular through export trade of agricultural products. In order to test the hypothesis on asymmetry between indicators of exports/imports between Ukraine and its trading partners, there was carried out a comparative analysis by means of the mirror statistics method. The comparison of indicators of products exports/imports by the method of mirror statistics confirmed the hypothesis regarding the asymmetry of these indicators in international trade. There have been analyzed the world experience in combating tax evasion and profit shifting abroad as well as the steps taken by Ukraine in this area, in particular the introduction of transfer pricing as a barrier to the hidden capital outflow from the country. The authors’ main contributions are discovered asymmetry of mirror data such as price, trade value and weight of Ukrainian grain. As a result, the mirror prices of imports of the partner country are significantly higher than the export prices of Ukrainian grain (IAp – 1,20-1,67), whereas for the USA, France, Germany revealed a lack of significant difference between mirror prices for some largest trading partners (IAp – 1,02-1,15). This is a confirmation of shifting profits from Ukraine in order to place them in more reliable jurisdictions and evidence base for the introduction of more stringent measures such as transfer pricing.