Total fiscalization in the making
Ukraine isn’t as yet prepared to adopt Georgia’s tax systemDespite the IMF’s financial aid, Ukraine’s fiscal domain remains a weak link in its economic chain. On August 4, the State Treasury informed that the State Budget of Ukraine has been implemented up to a level of 50.4 percent, in terms of income items, during the past seven months of this year, based on the indices of the year’s schedule. The obvious assumption is that budget incomes are lagging behind schedule by at least one month. True, compared to Ukraine’s desperate situation last year, this year shows definite signs of improvement. In January-July 2010, a total of 127.25 billion hryvnias has been received by the central budget’s general and special funds (allowing for VAT deductions, less budget-sustained entities’ own revenues), which is almost 23.5 billion (22.6 percent) more than during the same period last year. VAT refunds also bring up a good total of almost 9.7 billion hryvnias received by Ukrainian enterprises in the past seven months.
Still, lagging behind budget schedule by one month is like a gaping knife wound. The government will have to part with a billion dollars’ worth of the IMF loan. Does this mean that we keep eating away international loans without having a legally effective tax code? Even worse, the impression is that Ukraine has a dual system of tax authorities. On the one hand, this draft, prepared by the Ministry of Finance and the Tax Administration of Ukraine, has been made public. On the other hand, another draft might be made public any time, this one prepared under the able guidance of Deputy Prime Minister Serhii Tihipko. In fact, there is the third bill (adopted in the first reading) at the Verkhovna Rada. According to Vadym Kopylov, First Deputy Finance Minister, a cabinet task force, led by Tihipko, will be tasked with putting all this together, including proposals received in the course of a “nationwide discussion.”
Oleh Tsariov (Party of Regions), member of the VR Tax and Customs Policy Committee, declared on behalf of the committee, that they were prepared and willing to consider all such proposals inasmuch as they pertained to the draft/bill. He added that the bill submitted for nationwide consideration was practically identical to that prepared by the Ministry of Finance. MP Tsariov further considered it necessary to accuse Tihipko of bungling the draft tax code project, saying that the bill drawn up for the first hearing [at the Verkhovna Rada] under Tihipko’s supervision, to be submitted for nationwide discussion, could antagonize rather than consolidate Ukrainian society.
Meanwhile, the Ministry of Finance of Ukraine, issued the first batch of government bonds Tuesday, August 3. These are meant to make up for VAT refunds. Oleksii Liubchenko, deputy head of the State Tax Administration of Ukraine (DPAU), commented on this event, August 4, saying that the first tranche worth 48.5 million hryvnias would be received by 705 small businesses. The latter will serve as a touchstone for VAT refunds using e-bonds, then they will handle the second and third tranches. The second issue will be large businesses, including those with foreign capital. The third tranche will be oriented towards all other businesses. The press release, prepared in anticipation of Liubchenko’s press conference, reads that his department has received taxpayers’ requests for VAT bonds worth more than 14.7 billion hryvnias. This amount represents more than 90 percent of the money obtained after taking stock of Ukraine’s outstanding VAT refund bills. These bonds will be issued to the tune of more than 14.7 billion hryvnias. A total of 1,970 taxpayers will be able to receive them, unless they refuse these securities for reasons best known to themselves.
When asked by The Day about how the secondary VAT-refund market could be organized, Liubchenko said this matter depends on the free market and wasn’t under governmental jurisdiction. He went on to say that the owners of such e-bank accounts would do best by actually using their money because phase one, with the market very likely to be overcrowded, could find them confronted with speculative prices.
Media people present provoked Ukraine’s number two tax hound into commenting on the draft Tax Code. Liubchenko was mildly skeptical about the whole project being discussed on a nationwide basis. He reminded them of similar practices of Pravda [under the Soviets]. He was against DPAU’s involvement in or with the draft, particularly in terms of drawing up certain provisos and assessing amendments. For the media present it was perfectly clear that Liubchenko didn’t want his department to face any more accusations of making the Tax Code the way they pleased. One thing DPAU refused to surrender was the authority to render legal assessment of newly submitted tax-exacting/levying novelties. In fact, Liubchenko said the only thing DPAU will insist upon is the “total fiscalization of all cash department transactions.” And then he really surprised the media audience when he produced a thin book, less than the size of a young girl’s palm. It contained the whole Tax Code of Georgia, adding that Ukraine wasn’t prepared to accept this kind of document.
