Mikhail Titarchuk: Our task is to prevent the occurrence of tax debt by encouraging taxpayers to pay their debts independently
For years, there has been a tendency of growing tax debt. This indicates that approaches used by the State Tax Service of Ukraine have lost their relevance and should be improved. This was stated by Deputy Chairman of the STS Mikhail Titarchuk in his blog in the online edition “Liga. Blogs.”
According to him, to date the consolidated budget has not received almost 122 billion UAH due to the non-payment of obligations to budgets agreed by taxpayers. For comparison, almost the same amount in the state budget for 2020 was planned to be spent on defense or health care.
“From the beginning of 2020 to the 1st of October 2020, the tax debt has decreased by 3.2 billion UAH. Such dynamics is definitely positive. Moreover, one of the main reasons for occurrence of such debt this year was the coronavirus pandemic which affected Ukraine in terms of suspension of economic activity during the period of strict quarantine” – shared Mikhail Titarchuk.
Much of the tax debt today is concentrated in the public sector of economy – as of early October, the non-payment by such business entities amounted 18.7 billion UAH (more than 15% of total debt). The biggest debt was formed by entities subordinated to the Ministry of Energy of Ukraine – 11.51 billion UAH.
Herewith, the number of debtors – legal entities is much less than the number of individuals, although amount of their debt, on the contrary, is much higher. Thus, 191.8 thousand legal entities owed 117.1 billion UAH to the budget and 3686.6 thousand individuals – 8.9 billion UAH.
“However, today we can already talk about certain positive tendency. For 9 months of 2020, the Service managed to provide 7.27 billion UAH of revenues to repay debt to the consolidated budget. Significantly, recently there has been an increase in the level of taxpayers’ consciousness as almost 90% of these revenues are self-payment of debt without the use of so-called “hard” methods of collection (sale of debtors’ property in a tax lien, blocking of accounts, etc.)” – emphasized Mikhail Titarchuk.
According to Deputy Chairman of the STS, the growing tendency of tax debt during many years indicates loyalty of Ukrainian legislation towards dishonest taxpayers and the lack of effective legislative instruments to collect such debt.
Given these problems, the State Tax Service has developed draft interrelated Laws of Ukraine on amendments to the Tax Code of Ukraine and some Laws of Ukraine (on improving the procedure for repayment of tax debt) which were sent to the Ministry of Finance of Ukraine for approval. The main changes concern the following:
- increase to the economically justified amount of the minimum amount of tax debt (from 1020 UAH to 2210 UAH) to direct the tax claim, the use of tax lien, the statute of limitations;
- write-off of penalties and fines in case of payment of the principal amount of tax debt by legal entities within 3 months, individuals within 6 months;
- increase of the statute of limitations for collection of tax debt from 3 years (1095 days) to 6 years (up to 2190 days);
- initiating the sale of mortgaged debtor’s property through the electronic auction system “PROZORRO.PRODAZHI”;
- disclosure of bank secrecy from the debtor’s bank accounts.
Adoption of such changes will provide the tax authorities with effective tools both to repay the tax debt, reduce its overall amount and to improve payment discipline for dishonest taxpayers.
Regarding the improvement of bank’s write-off of funds from the taxpayers’ accounts, the logical step should be to make changes in banking regulations, which will include the disclosure of banking secrecy, as well as the initiation of information cooperation between tax authorities and banks on collection orders in the electronic form which will allow the debtor’s funds to be written off from the bank account and sent to the budget to repay debt.
“Definitely, the main STS’s goal is not just to collect existing tax debt, but, first of all, to prevent its occurrence by encouraging taxpayers to pay their debts independently. This is a direction that we follow today, by gaining international experience from the Intra-European Organization of Tax Administrations, the World Best Practices on the Recommendations of Experts from the US Treasury Office of Technical Assistance, Involving the EU4PFM Public Financial Management Program Experts in Consulting International Experts” – outlined Mikhail Titarchuk.
