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This has already happened in the rebellious 90's. Near each shop, marketplace or railway station, currency speculators were standing without hiding. They were called "money changers". They were looking in the eyes of every passer-by, repeating their special mantra: "Dollars, rubles...". Appealing to the "money changers" was a lottery, because you could easily be fooled, get a fake banknote, or simply your money could be taken away. But what should you do... There were very few legal exchangers, and currency exchange rate was too high there. National Bank (NBU) and law enforcement agencies made a lot of efforts to combat illegal currency transactions.
But now the golden time of the "money changers" can return, and, strangely enough, by the efforts of the National Bank. Recently the director of the NBU licensing department Olexander Bevz announced the introduction of patents for exchange offices. The argument is that a significant part of the exchangers of banks and non-bank financial institutions show a minimum profitability, and even loss. From this, Bevz concludes that the exchangers purposely hide their income so as not to pay taxes. A mandatory patent will ensure the filling of the budget, regardless of how much currency the currency exchange buys or sells.
At first glance, the idea seems rational. However, let us deal with it. Any bank or financial institution that carries out currency exchange passes mandatory licensing. The appearance of another permit document is an opportunity for entrepreneurs to create artificial obstacles, and, consequently, it leads to corruption. It is also unclear who will issue or, more precisely, sell patents. NBU? Tax service? The Ministry of Finance? Or maybe all together? And how much will this resolution cost? What are the requirements for obtaining it? Are you sure that while the bill passes Cabinet and Verkhovna Rada, some will not turn the topic of patenting exchangers into their own beneficial scheme?
And do not think that the acquisition of a patent guarantees you something. The very form of patenting provides for certain requirements, and the requirements provides for monitoring compliance and implementation. Exchange offices and their owners will be obliged to submit additional documents and reports. And the increase in the bureaucratic chain leads to corruption.
Now about the concealment of income. According to Olexander Bevz, after the cancellation of a 2% charge to the Pension Fund from the sale of currency, the volume of exchange transactions grew 4.6 times. The growth occurred after raising the limit on the sale of currency to individuals from 12,000 to 150 per day. Of these facts, the director of the NBU's licensing department suggests that the exchangers were hiding the real figures of buying and selling currencies. And after easing the restrictions, it became more willing to declare their operations.
Olexander Bevz speaks that the exchangers might conceal the profits. It is the low margin (the difference between buying and selling currency), which is set for the exchangers. However, there is quite a logical step. A large margin is possible in conditions of significant fluctuations in the exchange rate. We witnessed this from the end of 2013 and until the first half of 2015. In such conditions, not the rate is important for the clients, but the presence of the currency as such. Now the rate has more or less stabilized. Therefore, exchange points compete for customers and try to expose the most attractive exchange rates and a relatively small margin.
Concerning profitability. High profitability of each separate exchange is important if the owner has few such points. However, in the case of large networks, the exchange of financial institutions or banks, when the number of currency exchange points is estimated in tens or even hundreds, the incomes of one single item are not that important. The whole network should be successful. And for this you need to fight for each client, to provide the most affordable and convenient services.
I do not try to convince at all that all exchange points are working honestly and transparently. Yes, there are abuses, and fraud of cashiers, and the black market is still thriving. But instead of fighting with shadow businessmen and criminals, the NBU wants to even more "shave" those who are already working legally and paying taxes. The ill-considered and unreasonable patenting of currency exchange points will lead to the shadowing of the market.
It has already happened, for example, in 2009, when the government tried to artificially regulate exchange rates (limiting the margin). Then the cash foreign exchange operations moved to the black market.
So it might happen this time. Introduction of patents for exchanges might lead to the fact that the cost of their services would increase, and this would alienate customers. And some owners of non-banking institutions will decide that it is unprofitable to deal with the exchange of money legally. It would result into rate growth, reduction of legal exchange offices, hundreds of people will lose their jobs, and revenues to the budget will decrease. However, the black currency market will thrive.