Column by Volodymyr Dubrovsky, senior economist at CASE Ukraine for Interfax-Ukraine.
Key points:
At the end of 2023, the government adopted the National Revenue Strategy (NRS). Formally, it is to modernize the tax system. In fact, it provides for a sharp expansion of the powers of tax authorities and the introduction of broad discretion. In Ukrainian realities, this does not mean efficiency, but more pressure on business, corruption and abuse. It is significant that even the governments of Azarov and Yanukovych were unable to implement such ideas.
The authors of the NSR explain:
first, it is necessary to “restore trust” in the tax authority, and only then expand its powers and actually roll back the simplified system. Moreover, the document claims that trust is already there: 64–75% of the population and business, they say, positively assess the professionalism and integrity of the State Tax Service.
But here the manipulation begins.
Firstly, these indicators are from a survey in the fall of 2022, when the attitude towards state institutions was abnormally positive due to the war. Secondly, they concern only the “service” part of the tax service: consultations, receipt of reports, electronic services. Control and punitive functions are outside the frame.
To understand the real situation, CASE Ukraine conducted an independent representative survey, and the World Bank conducted its own study of the cost of paying taxes in Ukraine. And the results are strikingly different from the optimistic picture of the NRS.
Yes, the service part really looks relatively acceptable:
about 80% of World Bank respondents positively assessed the electronic office and online reporting;
63.1% – the courtesy of State Tax Service employees. But even here 20.7% remained dissatisfied.
The situation with integrity is much worse:
28.3% of World Bank respondents assessed the honesty of tax officials as poor;
another 28.3% refused to answer (which usually means a hidden negative assessment);
27.5% of CASE Ukraine respondents believe that the tax authorities facilitate tax evasion schemes;
23.9% are convinced that the fight against abuse is unsuccessful or mostly unsuccessful. Under such conditions, granting the tax authorities even more powers is dangerous. Especially since 52.1% of CASE Ukraine respondents already believe that tax officials abuse their powers, and 18.3% believe that this happens constantly. Even the formal procedure for submitting a referral for an inspection causes problems in 30.8% of cases. Among sole proprietors without employees, only a third were able to familiarize themselves with the official inspection order.
A separate story is VAT. Despite the 2017 “reform” and the launch of the SMCOR, 20.2% of CASE Ukraine respondents are aware of informal payments for unblocking tax invoices. And 15.1% reported cases of bribes for VAT refunds they know of — despite the fact that only a little more than half of those surveyed were payers of this tax.
The conclusion is obvious: without a real reboot of the tax system — with competitions, international experts, and a sharp reduction in discretion — there will be no result.
Only after that can we talk about fighting large-scale schemes that, according to business estimates, tax officials are currently “covering up.” This is what could bring the budget hundreds of billions of hryvnias. The irony is that the NSD itself does not even have an assessment of the fiscal effect of its measures. Instead, cargo reforms are being imposed on Ukraine under the slogans of “harmonization with the EU.”
The most striking example is the idea of introducing VAT for individual entrepreneurs with a turnover of UAH 1 million or more. This norm was included in the memorandum with the IMF even before the “rebuilding of trust” and without a cost-benefit analysis or M-test.
The result is the risk of scaling up corruption, shadowing, and the formation of an institutional trap. Without a real tax reform, Ukraine risks losing the chance to create a system that is truly trusted. And without this, no revenue strategy will work.