Third anniversary of “Euro-Maidan”: Ukraine’s tax debts have grown fourfold

Ukraine’s Audit Chamber has reported that in 2014-2016, the taxies, levies and payments underpaid to the state budget have increased 3.8-fold reaching almost 59 billion hryvnias (about 130 billion rubles on the current rate) as of the beginning of the current year. In this light, auditors have recognized the current system of the state management of tax arrears as inefficient and non-transparent.

Due to inefficient measures towards debtors, the tax debt obtains an “uncollectable” status and is further written-off. Thus, during the last three years, the state budget receives by 15.8 billion hryvnias (almost 35 billion rubles) less than envisaged. “Debts are disappearing, like water off a duck’s back,” the authors of the Audit Chamber’s report complain.

The biggest part of the tax debt (88%) is VAT, profit taxes of enterprises and leasing payments. The main reason why the debt has increased so dramatically is that taxpayers failed to pay certain payables they were to redeem independently. As of early 2014, such liabilities amounted to 6.7 billion hryvnias reaching 36.9 billion hryvnias already at the beginning of 2017.

“Such dynamics shows high risks of worsening payment discipline of taxpayers and generally pumping up the budget,” the report says.

Yet in late 2016, Ukrainian sources reported that almost 140 companies in the country or 9.3% of total had tax debts. The following sectors were deemed most problematic: gas production (15 billion hryvnias), wholesale trade (5.3 billion), fisheries (4,8 billion), telecommunication (3,2 billion), fuel trade (1,6 billion).

Meantime, the fiscal burden in Ukraine continues to increase. As EADaily has reported recently, the government intends to introduce general declaration of incomes and expenses of individuals to track all big purchase for over 50,000 hryvnias (110,000 rubles) and impose fines, in case the source of funds is not confirmed. However, all these measures will hardly reduce the shady economy level in the country substantially. According to the Ministry of Economic Development and Trade of Ukraine, as of mid-2016, the shadow economy in the country totaled about 40% of GDP.