Tax breaks introduced by the Russian government to restore the occupied territories in Ukraine have brought large profits on the black market and led to the opening of a criminal investigation into the fact of a large-scale fraud in Mariupol, The Moscow Times reports.

Mariupol, a port city on the Sea of ​​Azov that had a population of about 400,000 before the Russian invasion, was almost completely destroyed during the blockade, which spread in the international media and ended only in mid-May last year, the surrender of the last Ukrainian soldiers defending the plant ” Azovstal”.

Since then, Moscow has boasted of its efforts to rebuild a city it had almost reduced to ruins.

Even Russian President Vladimir Putin visited Mariupol two months ago to personally inspect how the reconstruction work is going. According to footage released by Russian state media, Putin arrived in Mariupol by helicopter and visited several neighborhoods of the city, making stops and talking to residents.

However, The Moscow Times notes, citing sources in the Russian tax authorities, that Moscow’s tax authorities have launched an investigation against dozens of companies in the city that have created a scheme to avoid paying value added tax.

Before Putin announced the annexation of occupied Ukrainian territories in September of last year, the Russian Ministry of Finance considered Mariupol, located in the Donetsk region, foreign territory and allowed Russian companies to work there without paying VAT.

Problems with the state budget of Russia

Revenues from VAT, the main tax that brings 20% of revenues to the Russian state budget, have fallen in Russia over the past year.

Against the backdrop of a decrease in revenues from energy exports and a sharp increase in military spending, the Russian budget deficit has grown in recent months.

One solution being considered by the finance ministry in Moscow is to increase the tax that foreign companies must pay to leave the country, but Russian officials are aware that this would raise windfall revenue, while the political leadership in Moscow is giving increasing signals that that it is preparing for a long war.

To try to stem the outflow of foreign businesses and help domestic companies in the context of Western sanctions, Russia imposed a moratorium on company inspections last year, but the situation also appears to have left room for numerous abuses.

According to The Moscow Times, authorities have so far opened several criminal fraud cases against construction companies that received contracts in Mariupol, and individuals involved in the scheme are being questioned in Moscow.

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