Ukraine Modigliani-Miller tax arbitrage

Today I received some tax saving wisdom from a taxi driver in Ukraine. He told me that people who import cars to Ukraine sometimes cut the car in two separate pieces and carry it through the customs this way. By doing this, they save a fortune on import tax. A car carried in two pieces is seen as spare parts and therefore is taxed at a much lower rate than a normal car.

When in Ukraine, the car is welded back into one piece. After that, it’s usually sold locally at a good price. I looked through forums and apparently this is a common practise in developing countries, particularly in post-Soviet states such as Ukraine.

The full story, with more pictures, is here.  For the pointer I thank Joe C.