If management has decided to implement fiscalization to achieve economic growth, it would be useful to know the reasons supporting this choice.
Any tax changes that are not formalized as a draft law on amendments to the Tax Code of Ukraine, in most cases, are not even worth attention; those submitted for consideration by parliament are worth discussion; adopted changes are worth worrying about. Therefore, a document called “strategy” with indicators like “during 2024-2030.” does not cause excitement. But disappointment – yes. Because we are talking about the “National Revenue Strategy” (document).
It was in vain that the process of its preparation was accompanied by such intrigue: oh, you will see everything in the strategy; the strategy will contain all the answers to the questions; our Western partners do not have time to wipe the sweat from their brows - they help us create it; There will be a strategy - then we will live!
This intrigue only increased the final disappointment.
Let's start with the fact that this is not a strategy. There are suspicions that the people who worked on this document do not really understand what a strategy is in general. There are also suspicions that Western partners helped very sporadically and did not see the entire text at all. And if you saw it, then damn it, I wonder what their reaction was.
Obviously, after the revision was made public, someone hinted to the Ministry of Finance that the document was not working, because the Ministry of Finance literally rushed to publicly justify itself:
“The National Revenue Strategy is a framework document that serves as a guide for the implementation of reforms... At the same time, it is a flexible document that allows for adjustments to the sequence of activities and content... it is one of the structural beacons... takes into account the steps that Ukraine must take on the path to European integration... "
So that you understand the level of disrespect for readers, European integration in the strategy is taken into account as follows: “... will occur in accordance with the Schedule for the implementation of obligations for accession to the EU, after its approval.” And so after each “copy-paste” of European directives. If the European assistants did not work on this document for free, then I would like to look at the budget.
The fact that strategy is a “flexible pointer” is scary, because it turns out that we have no idea where we would like to go and in which direction we are now wandering.
I won’t undertake to retell 147 pages in two paragraphs, but you definitely saw the main thing in the news: the simplified taxation system will become more complicated, simplifiers of the 1st group will be transferred to a rate based on turnover, the rate for simplifiers of the 3rd group will tend to 18%, all credits are not for entrepreneurial the bill will be subject to the same 18%, everyone will be forced to pay VAT, the progressive personal income tax scale will be returned, the “Mobile Anti-Corruption Center” will be introduced...
For what?
It's hard to say... The only figure we can rely on is 27% income growth in GDP by 2030. Where, how and who dug out these 27% cannot be found. There are no strategic explanations in the strategic document; there is a plate with forecast macroeconomic indicators from the Ministry of Economy, but until 2026, which clearly does not take into account the measures proposed by the Ministry of Finance. The practice of presenting two development scenarios “with reform” and “without reform” has not yet reached our latitudes. So how much we will actually get in numbers after the reform is unknown, and the blah blah about “increasing budget revenues on a sustainable basis” is unconvincing.
Unfortunately, the strategy ignores the strategic problems of the Ukrainian economy.
The shrinking real economy and regional distortions are a problem. A declining population, labor shortages and glaring labor market problems are a problem. Growing imbalances in foreign trade, where technological imports are steadily increasing and raw material exports are slowly slipping, are a huge problem.
All of the above directly affects the ability of our economy to emerge from the crisis. All of the above can and should be adjusted, among other things, by tax policy and are practically not mentioned in the strategy.
The part devoted to incentives for the development of the processing industry is indicative. In ten thousand characters, the authors tell us that they know about Ukraine’s industrial lag, and plan to evaluate the effectiveness of existing tax incentives for the development of processing and look for ways to modernize them. Somewhere, sometime. In perspective.
In theory, it is fiscal policy that can be the main incentive for business activity and attracting investment. Thanks to the existing simplified system for micro-businesses, it should partially help in solving problems in the labor market. It also has leverage to increase the level of processing and reinvest in technological development.
Only for this purpose the strategy would have to contain measures essentially opposite to those proposed. This should not be done out of a desire to squeeze the last out of those who are still somehow floundering in our real sector, but to open a window of opportunity for the development of existing and the emergence of new businesses. Increase tax collections not by increasing rates, but by increasing both the number of payers and their income. This, by the way, is the most obvious approach.
If we nevertheless decide to follow the unobvious path of fiscalization for the sake of growth, then we would like to at least see arguments in favor of its choice.
Why, for example, will an individual entrepreneur of the 3rd group, who is now abroad, return to Ukraine to a rate of 18%, if already now, in refugee status, he can open a local analogue of an individual entrepreneur with a rate in the range of 10-15%?
What will thousands of unemployed Ukrainians do if even the opportunity to earn a living in the “buy and sell” format is taken away from them?
Why will the wholesale acquisition of “VAT payer” status bring us closer to the EU, where almost every country has stimulating VAT benefits for small businesses, even its absence (and excise taxes, by the way, too)? It turns out that the EU countries have a greater need to stimulate their economies than we do? Don't we need it?
What about the conceptual question of state effectiveness? Because if you want a tax burden at the level of Norway, maybe public services should be provided at the same level?
After all, it seems that we are still overpaying a little. From 64 to 75% of respondents trust the professionalism and integrity of the State Tax Service, the authors of the strategy assure us, based on data from a survey they conducted with the help of international technical assistance. I wouldn’t pay for this, considering that 57% of the complaints that the Business Ombudsman Council receives relate specifically to abuses by tax officials.
Even the most painful issue of the last year - the blocking of tax invoices - is being resolved very sluggishly, and the number of blockings, despite the positive dynamics, is still 3-4 times (!) higher than the adequate level. At the same time, the number of complaints about inspections, about far-fetched fines for using tax breaks introduced at the beginning of a full-scale invasion, about sanctions for failure to submit primary documents destroyed during hostilities is increasing. Are all these complainants included in the 25% who are dissatisfied with the work of the tax authorities? Yes, only the blocking of invoices still affects 28% of the entire real sector.
How do you like this interpretation of the results of the survey mentioned in the strategy: 8% of respondents believe that in order to obtain STS services one always has to resort to corrupt practices, and 28.2% - in some cases, and this indicates “a high level of perception of corruption among the population " If it were possible to refuse the services of the State Tax Service, believe me, the population would not wait a minute.
All these manipulations lead us to the following conclusion: the strategy will not change for the better not only the economy and fiscal policy, it will also not affect the quality of work of the fiscal officials themselves. Don’t be surprised, but the State Tax Service is already “on the path to effective anti-corruption activities and complete rejection of corruption in any of its manifestations.” And foreign investors, choosing between Poland and Ukraine, will, of course, choose us, because they sleep and see how our tax authorities will block a hundred invoices for them in one month, impose an unreasonable fine, and after a court decision in favor of the payer, they will stupidly refuse to comply with it. This is an investment dream!
However, there is no need to panic prematurely, because it is unlikely that the creators of the strategy soberly assessed their own ability to bite off the declared piece of reforms.
All changes concerning payers are impossible without a unified data system about the same payers, their accounts and the movement of their funds. Moreover, an impersonal system with encoding of personal data (without a bit of irony, we thank the EU requirements here). And, accordingly, a regulated procedure for operating this data system. It doesn't exist yet.
During 2024 they plan to only create its concept. It will take another year to prepare changes to the legislation and determine the system administrator (I don’t even know who it will be). Somewhere in 2026, they will actually start creating the database itself. Moreover, the very fact of its creation (and it really is not superfluous) does not oblige us in the future to accept all the tax innovations voiced in the strategy.
We hope that by this time there will be bright minds in the country who will offer truly strategic solutions aimed at economic growth, improving Ukraine’s competitiveness and its investment attractiveness.
And we remember: we have less and less time for useful changes.
