When reforms are real

Press service of the State Tax Service of Ukraine, published 06 May 2021 at 16:56 Chapter: News

Office of Technical Assistance of the US Department of the Treasury started its work with the STS in June 2020 and keeps providing assessment of the STS’s progress on a path of reforms. Particularly, the OTA of the US Department of the Treasury in a report rated 4 points (excellent progress) on current leadership and support capacity, 5 points (significant progress) on project management and 3.5 points on change management (good progress).

Need to reform the Tax service arose in the mid-2000s. Since then, new service structures have been introduced, which even existed in the ministry format. However, in the end, all these changes were purely formal and did not lead to a new quality of service, transformation of the daily work of tax specialists and positive public perception of reforms. Consequences of such “reform cosmetics” were a systematic deterioration of public finances.

The next transformation of Service in 2019 did not lead to strategic changes. Specifically, at the end of April 2020, the Tax service informed the Government about a threat of non-receipt of even reduced budget revenues. That is, efficiency of the Service decreased, despite the constant declaration of changes.

Further imitation of reforms was unacceptable for society and feeling of distrust grew in business. Therefore, the top leadership of the state has made radical personnel changes and set clear strategic goals for the Service. There has been a real transition from imitating reforms to their actual implementation.

At the beginning (May 2020), the situation was as follows:

revenues of taxes and fees of general fund of the state budget administered by the STS were 11.7 billion UAH lower than the indicative figures, including the VAT lower by 1.1 billion UAH;

annual indicative revenues figures were reduced by 96.7 billion UAH, including the VAT lower by 21.4 billion UAH.

Given the need for financial resources to counter the spread of COVID-19 pandemic and to fund measures to support income-deprived citizens, the continued persistence of this tendency has jeopardized the entire public finance system.

But as a result of systemic reforms, the situation has changed radically.

Vector of the STS’s efforts is aimed at counteracting dangerous manifestations of the shadow economy. At the same time, systematic communication with taxpayers was built and their rights were ensured with regard to timely receipt of budgetary VAT reimbursement.

In result:

- VAT revenues to the state budget amounted to more than 77 billion UAH in September 2020 (ie level of revenues that was included in the budget for 2020 was reached). In October and November 2020, an annual revenue indicators of 2019 and the initial indicator for 2020 (namely 96.8 billion UAH) were consistently achieved. In total during 2020, the general fund of the state budget received 117.7 billion UAH of the VAT with full satisfaction of the application for reimbursement of this tax to taxpayers;

- revenues from taxes and fees to general fund of the state budget administered by the STS in 2020 amounted to 507.5 billion UAH, which is 50.2 billion UAH more than last year;

- this tendency has improved this year, namely general fund of the state budget received 165.2 billion UAH during January – April 2021. This exceeded determined indicative figures by 10.7 billion UAH and level of revenues over January – April 2020 by 27.7 billion UAH. Including the VAT that amounted to 51 billion UAH, which is 5.4 billion UAH higher than the indicative figure and exceeding by 1.5 times the fact of the same period last year.

In just 1 year of work, in the absence of objective economic preconditions for revenue growth, payments to general fund of the state budget administered by the STS, failing to reach the target of 11 billion UAH over January – April last year, now exceed it by almost that amount.

STS has made a significant progress in establishing principles and procedures for managing reforms (according to the IMF technical report, March 2021).

State Tax Service of Ukraine will continue to consistently carry out reforms in close cooperation with international partners, realizing its mission – to become open, transparent, modern and technological Tax service that provides quality and convenient services to the taxpayers, effectively administers taxes, fees and payments and shows intolerance towards corruption.

 

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